HM Revenue and Customs (HMRC) has reinstated Child Benefit payments for approximately 17,000 individuals after incorrectly freezing their funds in a controversial government initiative. The move comes after a Labour Party-led crackdown, launched in August following a pilot scheme, aimed to identify parents who had departed the United Kingdom for more than eight weeks and were thus no longer eligible for the benefit.
Widespread Impact of the Freeze
Initially, HMRC froze payments for over 23,700 claimants as part of this enforcement effort. However, an early reliance on Pay As You Earn (PAYE) data was quietly abandoned when the system was fully implemented, resulting in thousands being erroneously flagged as having left the country. This administrative error led to significant financial distress for many families relying on these benefits.
Resolution and Ongoing Cases
HMRC permanent secretary John-Paul Marks disclosed that 17,048 out of 23,794 cases, representing 71%, have now been resolved in favour of the claimants. In contrast, only 1,109 individuals, or just under 5%, were ultimately found to be non-compliant with the eligibility criteria. This leaves around 5,600 cases still under active investigation.
Mr Marks explained that these remaining cases involve customers who have not responded to multiple attempts at contact, including letters and phone calls, and are therefore "deemed to have left the country." He emphasised the need for a cautious approach moving forward, stating, "We will take it very slowly this New Year to get it right because we do have a fraud-and-error exposure that is a quarter of a billion pounds a year."
Data Imperfections and Financial Implications
During discussions with MPs, Mr Marks highlighted the limitations of the data used in the crackdown. He noted, "More generally, we know that the data we get from the Home Office on entries and exits is imperfect, and we were very clear on that all the way through. It should only be the start of an enquiry, not determining whether someone is eligible or not."
Regarding the financial impact, Mr Marks revealed that the initial loss was just under £49 million, as disclosed in HMRC's accounts. However, after remediation of all cases, the final outturn was £56.7 million, slightly higher than previously estimated. He also mentioned that arrests were made in connection with the issue, with collaboration between Romanian authorities and UK officials.
Restoration of Payments
In a notable admission, Mr Marks told MPs that payments had been restored in "more than 3,600" cases, which is less than a quarter of the true total now acknowledged. He stressed the importance of improving the customer experience, saying, "The important thing now is making all the changes to the customer journey." This focus on rectification aims to prevent similar errors in the future and ensure that eligible claimants receive their benefits without undue interruption.
