Select Committee on Social Security Report


APPENDIX 9

Memorandum submitted by National Association of Citizens Advice Bureaux (NACAB) (CB 10)

INTRODUCTION

  1. The CAB Service is grateful for the opportunity to respond to the Committee's inquiry into child benefit. The Service deals with some 6.2 million enquiries per year. The four largest subjects for advice are social security, debt, housing and employment. Our clients are overwhelmingly people living on low to middle incomes, for whom child benefit can be an essential part of their weekly budgets. One CAB put it very succinctly:

    " child benefit is vital for many of our clients. It is rare to come across a client who is not receiving the benefit, for whatever reason. For many families, and particularly lone parent families, it is essential for every day expenses—it is not used for luxuries".

TAXATION OF CHILD BENEFIT

  2. The Government is giving consideration to the taxation of child benefit for higher rate taxpayers to pay for future increases of the benefit. Child benefit represents the contribution of the State towards the extra costs of children—which apply to all parents, regardless of income.

  3. There are practical difficulties in taxing a benefit which is paid to the woman in a couple, in a system which has separate taxation of men and women. If would be unfair if the benefit were treated simply as the income of the woman in a couple, particularly when there is increasing evidence of the unequal income distribution which exists in many families between partners in a couple. Moreover, the tax yield from taxing the income of those mothers or lone fathers who were liable to tax at the higher rate of 40 per cent would be fairly minimal: only about £40 million in 1998-99 (Lords, WA 6, 26.1.98). Yet it would be administratively difficult to tax men on income received by the woman in a couple in a system of separate taxation, particularly given the number of unmarried couples. To tax only married couples, would clearly be socially unacceptable.

AGE-RELATED CHILD BENEFIT

  4. There are arguments for paying higher child benefit for children under five when parents' incomes are often under the most strain due to caring responsibilities. On the other hand, the costs of children can escalate when parents are working and have to pay for child care—including pre-and post-school care, and school holiday arrangements. And there is evidence to suggest that the cost of teenage children can outstrip that of adults. For example, the authors of The Cost of a Child (Oldfield and Yu, CPAG 1993) used data from the National Food Survey, the Family Expenditure Survey, and the Health Education Authorities to calculate that the weekly food costs of a both a male and female child aged 11-17 were higher than those of their father and mother respectively.

  5. There is clearly a case for Government funded research to authoritatively establish the relative costs of children, to inform discussion about benefit levels—both means-tested and child benefit itself.

THE RELATIONSHIP BETWEEN CHILD BENEFIT AND OTHER BENEFITS INCLUDING INCOME SUPPORT

  6. It is a considerable grievance of many parents on income support or income-related jobseeker's allowance that the award of child benefit reduces the amount of their benefit. Despite the presentational difficulties, the CAB Service continues to support this rule on the basis that the higher a family's non-means tested income is, the easier it is for the household to combine that income with earnings to raise their income above income support or jobseeker's allowance level.

  7. Receipt of child benefit is the "trigger" for the award of dependants' additions paid with other benefits. Changing family structures have highlighted the difficulties of this arrangement for separated parents who continue to participate in their childrens' care—something the Government has made clear it is keen to encourage.

  8. However, it is worth drawing attention at this stage to the implications of an `active family policy' which recognises that children do best if they have two positive and committed parents even after separation. At present, the linkage of benefit for children to receipt of child benefit makes it difficult for separated parents (usually the father) to actively participate in their children's upbringing by contact visits to the home at week-ends or during the school holidays, as the following CAB cases illustrate:

    A CAB in Wales reported the case of a separated father with three children who came to stay with him every week-end. His ex-partner received child benefit for the children. He was in receipt of £49.15 per week jobseeker's allowance. He was not entitled to any extra benefit for the days the children stayed with him, and had just been informed that his benefit was to be reduced by £5 per week in respect of child maintenance. He was very upset that he did not have enough money to feed the children and would have to give up his only contact with them.

    A CAB in the Midlands reported a father with a joint residence order in respect of his son. The son lived with his father from Friday to Monday and half of each school holiday. The father was in receipt of £49.15 jobseeker's allowance and was finding it very difficult to look after his son properly because he had no money. His ex-partner received child benefit but was unwilling to share the money with him. The Benefits Agency correctly advised him that there were no benefits he could claim.

  9. A family-friendly benefits policy requires the Government to look again at the linkage of dependants' additions to receipt of child benefit if the parental responsibilities of non-resident parents in keeping contact with their children are to be acknowledged and supported.

PAYMENT OF CHILD BENEFIT TO THE WOMAN IN A COUPLE

  10. The PSI study `Purse of Wallet? Gender Inequalities and Income Distribution within Families on Benefit (Goode, Callender, and Lister 1998) found that money paid direct to mothers is more likely to be used to meet family needs. In families where income in the household is unequally distributed, often child benefit can be the sole source of income over which the woman has complete control, as the following case illustrates:

    A CAB in Buckinghamshire reported the case of a couple with three children, where the man who was in receipt of incapacity benefit and income support would only give his wife £50 per week to pay all the bills and feed and clothe the family. Her only other source of income was child benefit of £30.05 per week, without which she and her children could not have managed.

  11. The issue of the unequal distribution of income within the family is a hidden one, not only affecting the very poor. The PSI study showed, for example, that both men and woman saw wages as conferring on the earner greater entitlement to spend than on the non-earner. Child benefit, paid to the mother, is a key way of ensuring that money intended for children's welfare fulfills its purpose.

CHILD BENEFIT AND WORK INCENTIVES

  12. Child benefit is particularly important when a parent returns to work. It is often crucial income, particularly for clients going on the family credit because it is not counted as income in the family credit calculation. It can make the difference between taking a job rather than staying on income support:

    A London CAB reported a lone parent with one child who had found a job for 16 hours a week earning £60. The CAB calculated that with family credit, housing benefit and council tax benefit, she would be £17 per week better off. Her income of course included child benefit of £17.10 per week.

    Midlands CAB reported a lone parent with two children who had found a job working 29 hours per week. She was clearly going to be better of working than on income support, but faced a `gap' in income between the termination of income support (which stopped as soon as she started work) and receipt of family credit—a gap of between five to 10 days. She would not receive any actual earnings for six weeks. In response to a request for a crisis loan, the woman was told to borrow off friends or take out a bank loan. The client was very keen to work, and her child benefit of £26.40 was a vital life line.

  13. It might be argued that working families tax credit, which will be paid at more generous rates than family credit, will remove the "better-off" problem for many parents making child benefit less important in this context. However, there will be a significant number of parents, particularly lone parents, who will not be able to benefit from the full potential value of working families tax credit because they will not be eligible for the child care costs credit element. This is because the child care costs tax credit is restricted to parents using registered childminders or school/local authority schemes. CABx evidence shows that many parents pay trusted friends or neighbours to act as childminders who are not registered. The problem is particularly acute for parents who shape their jobs around their children's hours by working evening or night shifts when the children are in bed. It is virtually impossible to use a registered childminder in this situation, because the children remain in their own home and not the childminder's:

    Another CAB in London reported a client with four school age children who was very keen to work. She found part-time care assistant work for over 16 hours per week and paid £50 per week to a childminder to come to the home each morning and get the children off to school. She could not get a registered childminder to do this, as they work from their own premises.

    A CAB in Yorkshire reported a male single parent who worked in the armed forces, doing shift work. It was therefore difficult, if not impossible, to take account of normal creche facilities. He had employed an au pair who lived in and put the children to bed in necessary. He was refused family credit because his child care costs could not be included as the au pair was not registered. Money was extremely tight, but at least he had £26.40 in child benefit coming in as well as his wages.

  14. For people ineligible for the child care tax credit, child benefit will remain particularly important.

  15. The CAB Service believes that, along with a minimum wage, child benefit is important as part of a strategy to reducing workers' dependence on means-tested benefits and enabling them to become self-supporting.

CONCLUSION

  16. The CAB Service believes that child benefit must remain a crucial cornerstone of the Government's welfare policies towards families with children. In the words of the Coalition for Child Benefit "[it] is the benefit for the future. It follows the child through changes in employment and family patterns, giving a basic security to family finances in today's insecure world. It symbolises society's commitment to invest in the next generation".

September 1998


 
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