Call me cynical, but that's how the government wants it. Those in power want and need a class of people wholly dependent upon them - it gives those in power MORE power and a solid block of voters come election time. Then, they have their built-in boogeyman (the guy who comes along and suggests a hand up rather than a hand out) who wants to come and "take away their money". These elites are all too happy to take away from Peter and give it to Paul because what do they care, they make their salary and live high on the hog as a result.
They didn't hide that this was what they were doing. The Labour government, who invented Tax Credits, were quite open about that and I read that Blair called them a "vote winner". He chose Brown's idea for a benefit called Tax Credit, over the new welfare system ideas of his Minister of Welfare Reform, Frank Field MP, which would have focused on helping people get off benefits.
Frank Field then resigned his ministerial post. He called Brown/Blair's Tax Credits benefit, a poverty trap.
Tax Credits
i.e. - lose your job, take a lower paid job ASAP and claim Tax Credits.
Get a better paid job and stop your Tax Credit claim.
At the end of the tax year, you have to pay thousands back to Tax Credits as Tax Credits are based on annual earnings.
OR
-stay on benefits, don't more hours or take promotion and keep your Tax Credits, but when the children leave home/go to university, Child Tax Credits all stop and the parents are left in poverty and little work experience.
However after Tax credits were invented, the UK's annual Welfare Bill then became more than the government takes in income tax for the first time ever, and on the Labour's watch. They did then start to bring in benefit cuts i.e. medicals for those who claimed they were too sick to work or say they are disabled, and they appointed a private company called ATOS to carry out these medicals. Before they could implement other benefit cuts, they got voted out.
The new government got that same Labour Minister who resigned, to help them overhaul the welfare state. These new laws are through parliament and the Lords and are on their way in as they are being rolled out across the country. Mixed reaction on the welfare forums; some can't wait as they will get more money with the new benefit taper when they work more; others trying to avoid being moved over as long as they can to avoid having to work.
These welfare laws also seem to end the European Court of Justice Ruling that said the UK must pay the Tax Credit benefit to low earning EEA citizens in the UK for every child they have that still lives in their own EEA country (Child Tax Credits) and for their spouse who still lives in their own EEA country (Working Tax Credits).
In addition to the welfare reform laws - On the back of the shock in 2014, that in 2013 nearly six billion pounds was given in the Tax Credit benefit alone to those who were a foreign national or who were a foreign national when they applied for a NINo, the up to 2 child limit for benefits was announced. Announced in Parliament during the budget in 2015 and stating that this would mean that now there would be more benefit money for these parents in France, Germany and Sweden. No limit was brought in for the number of children they can claim childcare for when both parents work.