Select Committee on Social Security Report


APPENDIX 8

Memorandum submitted by Mr Paul Burgess (CB 8)

TAXATION OF CHILD BENEFIT

  Child Benefit is presently easily understood, valued by the vast majority of claimants and taken up. Child Benefit is a basic element of any "better-off" calculation. That is to say, welfare rights advisers find that Child Benefit can make the difference to someone who wishes to start work but are worried about the withdrawal of welfare benefits. Part of the reason for this is, of course, that Child Benefit is disregarded for Family Credit purposes. Taxation of Child Benefit would almost inevitably introduce complexity and additional administration. It may complicate and cloud issues surrounding the poverty trap. For example, it may increase the marginal tax rates for those on low incomes. Working Families Tax Credit appears more complicated than Family Credit. To introduce taxation of Child Benefit alongside the introduction of Working Families Tax Credit may cause problems for the Inland Revenue, may adversely affect incentives, and may affect the success of the new benefit at a crucial time.

TIERED RATE FOR CHILD BENEFIT

  It is worth noting that there has not been any universal or contributory lump sum payment for expenses relating to the birth of a child since 1988. Although there are differing views as to the relative costs of bringing up children at various ages it is surely unarguable that the birth of a child is a time of major expense for parents. Welfare rights advisers have become used over the past ten years to advising anxious parents who simply cannot afford the expenses related to the birth of their child. Family and community networks are not as strong as they were. Those fortunate enough to qualify for help from the benefits system will find that the lump sum payment for maternity needs (which has not increased since 1988 in cash terms) is inadequate for anything but the most basic needs at £100. There are many more that slip through this safety net altogether. A significantly higher rate of Child Benefit for the first 12 months of a claim would help restore an important element of a welfare state that sought to support families.

HIGHER RATE CHILD BENEFIT FOR THE OLDEST CHILD

  The rationale for this can be supported by reference to the arguments above. The eldest child in a family can often be the most expensive one because of the need to purchase items of equipment and furniture that then last and are used for subsequent children.

CHILD BENEFIT AND INCOME SUPPORT ALLOWANCES FOR CHILDREN

  The relationship only exists in a conditional sense. Child Benefit has no bearing on the level of the Income Support allowance for children. Technically, it is treated as reckonable income in the same way as pensions or earnings would be. Since 1988 entitlement to Income Support child allowances and the family premium has been conditional upon receipt of Child Benefit. While in most instances this causes no difficulty, there are anomalies. Where, for example, the Child Benefit claimant is temporarily absent and unable to provide care, family members may provide care but be unable to claim benefit. This, typically, involves a grandparent. I can think of one case of a widowed grand father who had to look after his three grandchildren when his daughter was arrested abroad. He was unable to get any Income Support for the children until Child Benefit was awarded, several months later. A less committed carer may have left the children to the care of Social services, at greater public expense. Some flexibility in these cases would be welcome.

THE ROLE OF CHILD BENEFIT IN SUPPORTING 16-19 YEAR OLDS IN EDUCATION

  Current provision, or more accurately lack of provision, in this area and for this group is a serious problem. Reform that sought to support the educational aspirations of this age group is to be welcomed. The introduction of a maintenance allowance to replace the current mixture of Child Benefit and complicated and underclaimed) means tested/discretionary payments would be a step forward and may also drive certain success measures in terms of the wider aims of the welfare reforms.

CHILD BENEFIT AND CHANGING FAMILY STRUCTURES

  The payment of Child Benefit to the child's mother in the vast majority of cases ensures that the most appropriate person receives the benefit. It is still very unusual for a welfare rights adviser to deal with fathers who have the sole or main care of children. Prior to 1988 Supplementary Benefit as it was then, could be split between parents where the care of a child was divided. This gave rise to many injustices and was administratively complex. It did little to benefit children caught in the middle of "split care".

HIGHER RATE CHILD BENEFIT AS A WELFARE TO WORK INCENTIVE

  As already mentioned, Child Benefit is an incentive to work. The proposed disregard of Child Benefit for the purposes of entitlement to Working Families Tax Credit undoubtedly will help people make the transition to work from welfare. However, any further increase in Child Benefit and its current positive interaction with Family Credit (and Working Families Tax Credit as proposed) would depend to some extent for success on its continued tax-free status.

18 September 1998


 
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