Almost 9,000 working class families have been summoned to court due to the chaotic tax credits system.
The system forces parents to estimate their income for the coming year but they must pay back money if they end up earning a higher income.
If the families fail to pay back overpaid tax credits, the case is referred to the courts by HMRC.
However, the majority of families claiming tax credits are on low incomes and cannot afford to pay lump sums back quickly.
More than 600,000 families were given overpayments of more than £1,000 in the last 12 months and more than 500,000 families, earning less than £15,000, were overpaid on average by £555.
Liberal Democrats leader Nick Clegg has slammed the system and accused the Labour party of chastising the poor instead of helping them.
Mr Clegg added:-
“Hard-pressed families should not be criminalised because of Labour’s unfair tax credit system’.
The tax credits amount received depends on a number of factors, including income, costs of childcare, number of children and marital status but the Lib Dem leader wants the Government to fix the tax credit payments for 6 months to provide financial stability.
Stephen Timms, Financial Secretary to the Treasury, maintained that HMRC did not take anyone to court over errors. He stated that:-
‘It initiates court action only as a last resort to recover cash that individuals are not entitled to’.