Select Committee on Social Security Report


APPENDIX 3

Memorandum submitted by The Children's Society (CB 3)

1. INTRODUCTION

  1.1 The Children's Society is a national voluntary childcare organisation, which works extensively with children and families living in disadvantaged communities, and in conditions of poverty.

  1.2 We have retained a long-standing interest in the contribution to their quality of life made by a range of benefits, including those which are means tested and others which are universal like child benefit.

  1.3 We have been actively involved as members of the Save the Child Benefit Campaign, and the Coalition for Child Benefit. We disagreed with the decision of a previous government to freeze child benefit, and we have sought its reinstatement to its original value in real terms.

  1.4 We believe that Child Benefit is an important contribution to the well being of many families on low incomes, and that it achieves this because of a number of characteristics which do not apply to any other benefit, or mechanism for transferring resources to children.

2. SPECIFIC ISSUES

  2.1 Child Benefit's great strengths originate from its core principles. It is intended for children, to be spent on their needs. It is designed to be administered and collected simply. It is about recognising the additional costs of providing for children incurred by families. And, it is recognised as a universal investment on behalf of society in future generations.

  2.2 These principles, in turn, point towards a number of important practical consequences in the way in which Child Benefit is administered, as well as implications at the level at which this is set.

  2.3 Thus, the method of payment and collection can be made simple by virtue of the fact that it is a universal benefit. This ensures that it is among the cheapest benefits to administer, although introducing any element of complexity such as differential rates for the eldest child, or taxation, will incur additional administrative costs.

  2.4 It remains important that, by and large, child benefit is collected by mothers, because that appears to offer a substantial guarantee that it will be spent directly on children and their needs.

  2.5 Once again, because it is a universal entitlement, child benefit can be paid without interruption. At times of family change, or where other sources of income are interrupted, it represents an important form of continuity in family incomes.

  2.6 Although it is at too low a level to compensate for childcare cost, Child Benefit does contribute towards the choices parents are likely to make about whether or not to take up paid work. It is important that they retain this choice, particularly when their children are below school age.

  2.7 The manner of its payment, ensures that Child Benefit is easy to obtain, and that it is portable and flexible, so that it can meet the varying needs of households and families. This also means that where there is a change of family circumstances, entitlement can be preserved easily.

  2.8 If it is accepted that it is legitimate to provide for a common investment on behalf of society as a whole, in social cohesion, and in provision for future generations, then there can be no more straightforward or effective way of achieving this outcome than through Child Benefit. Any questions to be resolved therefore hinge on the level at which the benefit is set, and relatively marginal questions such as whether all children should get the same amount, and whether it should go direct to older children and young people who may wish to have the responsibility of deciding how they spend money attributed to them.

  2.9 Other questions have recently been raised, for example concerning the taxation of Child Benefit, and whether it should be split where children are spending part of their time with each parent.

  2.10 The Children's Society believes that the principles of universality, and the simplicity of approach represented by current arrangements should where possible be maintained, and enhanced. We do not believe, for example, that attempts should be made to split Child Benefit between parents according to the length of time children spend with each of them after family separation. This is a complex and impractical idea, which can better be dealt with through a more effective allocation of maintenance by way of the Child Support formula.

  2.11 We have also been invited to consider whether or not Child Benefit should be taxed, particularly where parents are high rate taxpayers. We do not believe that this option should be pursued for a number of reasons. Firstly, it should be recalled that Child Benefit was originally introduced in part to replace existing child tax allowances, because it was easy to administer, and it was more likely to go to children.

  2.12 Secondly, however calculations are to be made, inequities will almost certainly be built into the system. For example, where two parents are earning below the higher tax threshold, neither could reasonably be taxed on their Child Benefit; on the other hand, where one is earning very little but the other is earning above the threshold, combined household income could be the same, but Child Benefit may be taxable. Unless there is a return to joint household taxation, disparities of this kind will arise.

  2.13 Finally, it is unclear whether taxing Child Benefit can easily accommodate changing circumstances, where household compositions change, or children spend part of their time in one household and part in another.

  2.14 The government has said that it wishes to avoid means testing wherever possible, that it wishes to ensure that all sectors of society benefit from the welfare state, and it has expressed a desire to keep the welfare system simple. Child Benefit achieves all these objectives, and we see little reason to introduce complexities which might compromise its many positive attributes.

3. CONCLUSION

  3.1 In conclusion, we would just reiterate that there are a number of important reasons for maintaining the value and the structure of Child Benefit as it is at the moment.

    (i)  Child Benefit is a significant investment, some £7 billion per annum, and is a legitimate statement of commitment to children as representing our collective future.

    (ii)  Child Benefit is a form of `social glue`, providing an economic incentive for families to stay together, and contributing significantly to income maintenance and the alleviation of pressures on households on low incomes.

    (iii)  Child Benefit is reliable, and consistent, and therefore, unlike most other forms of income support, is an important bridge at times of difficulty, or where family circumstances change unexpectedly.

    (iv)  Because of its title, and the manner in which it is paid, Child Benefit is usually spent directly on children.

    (v)  Child Benefit is simple to administer, highly resistant to fraud, and very low- cost in relation to the overall amount paid out.

    (vi)  Child Benefit, because it is paid in cash, contributes to the choices families are able to make about whether to work or to commit themselves to caring for children, particularly where they are young. It is therefore an important contribution to flexibility in decision-making within families.

  3.2 For all these reasons, then, we believe that continued and indeed increased commitment to Child Benefit is of major importance in improving family life, enhancing social cohesion, and reflecting a proper commitment to all of our children.

September 1998


 
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