Select Committee on Social Security Report


APPENDIX 11

Memorandum submitted by South Lanarkshire Council (CB 12)

INTRODUCTION

  South Lanarkshire Council have a strong commitment to an anti-poverty strategy. Through it's Benefits, Advice and Advocacy Service the authority provides free, confidential advice to approximately 21,000 people per year. The vast majority of this advice relates to Welfare Benefits.

  Last year we helped South Lanarkshire residents to claim over £9 million in previously unclaimed benefits. As such, we have a great interest in any proposed changes to the benefits system and in particular child benefit.

  In his budget speech, the Chancellor said that "child benefit remains the fairest, the most efficient and the most cost effective way of recognising the extra costs and responsibilities borne by all parents." We welcome this commitment.

TAXATION OF CHILD BENEFIT?

  There would appear to be little revenue gain but huge administration problems and potentially huge administration costs.

  The net gains to low income families would be minimal.

  Even middle income families and above can depend on Child Benefit to meet their children's needs directly, such as nappies, clothing, or school expenses. Bradshaw and Stimson conclude that child benefit is a vital contribution to family finances and in the main tends to be spent directly on children's needs . . . "There is a moral sense that it should be spent on the children." (Bradshaw J and Stimson C, 1997 "Using child benefit in the family budget".)

  Taxing Child Benefit would mean it would only be families with children who felt the burden of paying for other families with children.

  A far simpler and more progressive way of redistributing income would be to decrease the threshold of higher rate tax and spend the revenue on increasing child benefit. This would redistribute from all high earners including single people and childless couples and not just those with children. With this reform there would be no need to reform the tax system and the cost of children would be shared by society as a whole.

HIGHER RATES FOR CHILDREN UNDER FIVE OR TIERED RATES AT ALL LEVELS?

  Lone parents with children under five will incur higher childcare costs if they are working and not all families will be eligible for help under the Working Families Tax Credit. If the are not working they are likely to be dependent on Income Support. Evidence from "Small Fortunes, Spending on Children, Childhood poverty and parental sacrifice" (Joseph Rowntree Foundation, 1997), shows that parents with children under five spend 43 per cent more on them than is covered by Income Support rates. To alleviate childhood poverty, parents with children under five need higher Child Benefit which is disregarded from means tested benefits.

HIGHER PAYMENTS FOR THE FIRST CHILD?

  We support the principle of higher payment for the first child. This is particularly beneficial for the lone parent families, fifty per cent of which have only one child.

RELATIONSHIP BETWEEN CB AND IS ALLOWANCES?

  An increase in Child Benefit would be of no help to those in receipt of means tested benefits such as Income Support, as it is deducted completely on a penny for penny basis. The only way to help families in receipt of means tested benefits would be to disregard Child Benefit in full or in part as income.

ROLE IN SUPPORT FOR 16-19 YEAR OLDS?

  Most 16-18 year olds have no access to benefits or to the "New Deal".

  If the function of the "New Deal for 18-25 year olds" is to assist them in becoming "Job Ready". Surely supporting 16-19 year olds in education is the best way of preparing young people to enter the job market or in advancing to a college / university education.

  Access to Child Benefit and other related benefits acts as an incentive for parents to encourage their children to continue in education. More young people are therefore entering the job market with a higher level of education and skills, providing employers with a higher calibre of new recruits, which can only benefit the economy in the long run.

  For Income Support recipients, the withdrawal of child benefit for 16-19 year olds would also mean losing the dependants increase of £30.30 per week for each child, and any other related benefits.

CHANGING FAMILY STRUCTURES?

  A report by the Institute for Public Policy Research entitled "A Complete Parent - Towards a New Vision for Child Support" (April 1998), concludes that outdated benefit rules and marriage laws, which leave separated fathers with few formal parenting duties and limited rights to benefit payments should be scrapped for the sake of their children. The report goes on to suggest splitting child benefit between both parents and that both should be able to claim other benefits for their children.

  One Parent Families Scotland agree that splitting Child Benefit, where care was truly shared, "could act as encouragement for more fathers to take a significant role after separation." (Ian Maxwell, O.P.F.S. September 1998).

  However, it is likely to continue to be the case that women spend more of their income on children than men. A simple time split may not be a true reflection of who takes primary responsibility for children's needs. It could also be abused by non-resident parents hoping to demonstrate that they are no longer liable to pay Child Support.

  If Child Benefit was split, the possibility of splitting other entitlement would have to be considered, (e.g. local authority school clothing grants, means tested personal allowances, etc.).

  Also, in light of the changing family structures, a tax on child benefit could create a nightmare scenario of tax transferring from mother to stepfather to absent father etc. in search for a higher rate tax payer.

HIGHER RATES OF CHILD BENEFIT?

  Evidence from Canada suggests that an integrated Child Benefit system with much higher levels of child benefit which are withdrawn gradually as income rises would be more effective in promoting social inclusion, alleviating poverty and reducing barriers to work. (Joseph Rowntree Foundation research findings, "Why special tax credits for low income families are being scrapped in Canada", January 1998).

INTERNATIONAL COMPARISONS?

  Greece is the only country in the industrialised world to tax its Child Benefit.

CONCLUSION

  The state has a responsibility for the welfare of children in partnership with private responsibility of parents through child maintenance. Therefore, changes to Welfare Benefits, and especially Child Benefit, should only be considered if they perform the following functions; to redistribute income from rich to poor; to redistribute income over the life cycle; to redistribute income from those without children to those with, and to prevent as well as alleviate poverty.

September 1998


 
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