OXFORD City Council has refused to follow other county authorities and fine people who make mistakes when claiming benefits.
Conservative-run councils are to introduce £50 fines for incorrect information given for council tax and housing benefit claims.
But the Labour-run city council fears it could hit poor families.
Deputy leader Ed Turner said fraud laws mean “there are strong penalties for those who deliberately give false information”.
But he said: “We do not want to unduly penalise people on low incomes for innocent mistakes. Some of the information required is really quite complex.
“If anyone is struggling we would encourage them to seek assistance, from the council or an advice centre.”
In the last financial year it overpaid £2.5m and reclaimed £318,975, though it can legally only reclaim £30.50 a week housing benefit.
Figures claimed back do not reflect the total collected as some is still being sought.
Cherwell, West Oxfordshire, South Oxfordshire and Vale of White Horse District Councils will use the 2012 Welfare Reform Act powers.
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