The Dutch government has resigned amid an escalating scandal over child benefits in which more than 20,000 families were wrongly accused of fraud by the tax authority. The move came less than a month before parliament was due to break up ahead of general elections scheduled for 17 March. Prime minister Mark Rutte’s cabinet is to stay on in a caretaker capacity until a new coalition is formed after that vote. “The government was not up to standard throughout this whole affair,” Rutte told a press conference. “Mistakes were made at every level of the state, with the result that terrible injustice was done to thousands of parents.” Political responsibility for the scandal lay with the current cabinet, he said, which had decided collectively that it had no option but to resign. “Things cannot ever be allowed to go so terribly wrong again,” Rutte said. The prime minister, who has headed three coalition governments since 2010, said the government would continue to actively manage the country’s response to the coronavirus crisis. A strict lockdown will remain in place in the Netherlands until at least 9 February and a curfew is under consideration. Polls suggest Rutte’s People’s party for Freedom and Democracy will win a fourth term in the election, with public opinion still largely backing him. The centre-right party is on course for just under 30% of the vote, more than twice that forecast for the second-placed party, Geert Wilders’ anti-Islam Freedom party. “This won’t have a huge effect on the governing parties’ polling,” said Rem Korteweg of the Clingendael thinktank. “The minister who was in charge of the child benefits scheme is now in opposition and has resigned; civil servants are being blamed for the predatory tax office. The government is taking ‘political responsibility’ but with little ‘political cost’.” As many as 26,000 parents were wrongly accused by the Dutch tax authorities of fraudulently claiming child allowance over several years from 2012, with as many as 10,000 families forced to repay tens of thousands of euros, in some cases leading to unemployment, bankruptcies and divorces. The tax authority admitted last year that at least 11,000 were singled out for special scrutiny because of their ethnic origin or dual nationality, fuelling longstanding allegations of systemic racism in the Netherlands. Orlando Kadir, an attorney representing about 600 families, said people had been targeted “as a result of ethnic profiling by bureaucrats who picked out their foreign-looking names”. The government has apologised for the tax office’s methods and set aside more than €500m (£450m) in compensation, about €30,000 for each family. The cabinet’s resignation came after a damning parliamentary report, Unprecedented Injustice, was published last month, which concluded that “fundamental principles of the rule of law had been violated”. The investigating committee chairman, Chris van Dam, denounced the system as “a mass process with no scope for nuance”. Ministers, MPs, civil servants and court judges all bore a share of responsibility, said the report, which also strongly criticised the government for the way it provided information to parliament. The opposition Labour party leader, Lodewijk Asscher, who was social affairs minister in the previous government, resigned over the affair on Thursday, conceding that a failed system had “made the government an enemy of its people”. Twenty of the families involved this week took legal action against Asscher and ministers from three of the parties in the outgoing coalition, alleging criminal negligence through a failure of good governance, racial discrimination and violation of children’s rights.