Gordon Brown has set out to patch up his ailing tax credit system by allowing low income families to earn up to £25,000 more than they planned before they are forced to pay back excess credits.

The chancellor hopes his unexpectedly large increase in the “earnings disregard” from £2,500 to £25,000 will prevent 95 per cent of people whose fortunes unexpectedly improve from having their credits clawed back by Revenue & Customs at the end of the financial year.