Select Committee on Social Security Appendices to the Minutes of Evidence


Memorandum submitted by the Fawcett Society (ICC 06)


    —  Fawcett welcome the reforms to the Working Families Tax Credit (WFTC) as an opportunity to overcome the problems with the current arrangements for women;

    —  However, there is already a seamless and integrated system of financial support paid to the carer—Child Benefit;

    —  The most effective way of tackling child poverty would be to raise child benefit. Concerns about the distribution of resources between income groups is most fairly tackled through the tax system;

    —  It is important to recognise that reducing child poverty and making work pay are not necessarily synonymous aims, and reducing child poverty should continue to be an aim even where it conflicts with providing incentives to work.


    —  In order for the ICC to be most effective in tackling child poverty, it should be paid to the main carer, set at a generous level and increased in real terms annually;

    —  The value of Child Benefit should not be allowed to erode over time;

    —  The ICC could avoid the negative impact of the WFTC on second earners in families (mainly women) by starting the taper at a high level and ensuring a low rate of withdrawal.


    —  Joint assessment of income raises issues around whether women and men have equal access to resources in the household. However, if the ICC was to be assessed on the income of both parents, it would need to be set at a generous level and include most families;

    —  The current disregard for child maintenance in the WFTC should continue with the ICC;

    —  ICC could be assessed annually if there could be instant notification and reassessment of payments in response to a fall in income or an event such as a death, divorce or birth;

    —  Small rises in income should be ignored with reassessment needed only if income rises by 10 per cent;

    —  Lone parents, or families of disabled children should receive a higher level in recognition of their specific circumstances.


    —  Subsidy of childcare would be best provided through direct subsidy to nurseries and childminders;

    —  However if the present system continues then the Childcare Tax Credit should be paid through the ICC rather than the ETC so that childcare arrangements can be made before a job has been begun;

    —  Subsidies could be more flexible so that parents can pay for the childcare arrangements of their choice.


  1.  The Fawcett society is the leading campaigning organisation for equality between the women and men in the UK. We work on issues of employment, education and democracy. Our vision is of a society where women and men are equal partners in the home, at work and in public life


  2.  Fawcett welcomes the proposed changes to the Working Families Tax Credit as it offers an opportunity to rectify some of the problems for women with the current arrangements

  3.  Fawcett would like to see a system which is based on the following general principles

    —  The importance of supporting children and their families;

    —  Ensuring that women are not penalised for the unpaid caring work which they undertake;

    —  Recognising that women are still more likely to take on caring responsibilities and the issues this raises for them, but encourages the sharing of these responsibilities between partners;

    —  Increasing women's access to household income.

  4.  Fawcett welcomes the government's aim to reduce child poverty and the aim of making work pay. However it is important to highlight that these two are not necessarily synonymous. In particular, whilst making work pay may mean that some non-working households will accept jobs they were otherwise likely to refuse, it will do nothing for the large numbers of children living in poverty in workless households. Reducing the numbers of children living in poverty needs to be an aim even where it conflicts with providing incentives to work.

  5.  We would also like to highlight that in fact, there is already an integrated and seamless system of financial support for children paid to the main carer—it is called child benefit. A substantial raise in child benefit would be an effective way of relieving child poverty and an illustration of society's responsibility for all children. Concerns about the distribution of resources between income groups can be dealt with most fairly through the tax system.

  6.  We are concerned that the value of child benefit should not be eroded over time and that the introduction of the ICC should not be used to replace this as a way of introducing means testing through the back door.


Payment and delivery of ICC

  7.  In order to be most effective in reducing child poverty, Fawcett believes that the ICC should be paid to the main carer. Research has shown that payments designed to lift children out of poverty are most effective if paid directly to the main carer[2]. At present the WFTC can be paid either through the pay packet, or couples can opt for the credit to be paid to the main carer. Although this has allayed some fears about the impact of transferring money from the main carer to the main earner, in order to ensure that money is most effective in relieving child poverty, we would like to see the ICC paid to the main carer in line with Child Benefit.

  8.  It is also vital that the ICC is set at a generous level and increased in real terms annually.

Avoiding disincentive's for Second Earners

  9.  Fawcett and others have had serious concerns about the disincentive for second earners inherent in the structure of the WFTC and the negative impact this has on women's participation in the labour market[3].

  10.  This is of serious concern as in today's labour market where many jobs are not long-term, it is important to encourage second earners to remain in employment so that households are not solely reliant on benefits when a job is lost. In addition, given that most lone mothers become single some time after the maternity period, it is important that women are able to retain the means of earning income independently, in order to reduce the likelihood of a workless household in the future

  11.  To avoid this same problem with the ICC, it would be necessary for the ICC taper to be started at a relatively high level and a low rate of withdrawal. Similar systems in Canada and Australia cut out payments at the higher end of the income scale—the top 15 per cent and 20 per cent of earners respectively, shifting from a poverty assessment to an affluence assessment.

  12.  Structuring the system to include a large proportion of families would also help to build a coalition between middle and lower income families and overcome any stigma associated with the payment.

  13.  Fawcett also had concerns that the WFTC worked against the sharing of caring responsibilities and paid work, by paying the additional credit to a parent who worked over 30 a week but not to parents in a household who decided to work for 15 hours each. We are pleased to see that the ICC will not continue this disincentive.

Structure of the ICC

  14.  Fawcett would like to see the payment and delivery of the ICC take into account the problems for women with the WFTC and be structured to avoid these pitfalls and better meet the needs of women and children.

Assessment of income

  15.  There are many points for and against the joint assessment of a household's income. Fawcett believe that whilst there are issues as to whether both partners have equal access to income resources within a household, it would not be appropriate to completely disregard the earnings of the non-caring parent. If the ICC is to be assessed on the income of both parents, it would need to be set at a generous level and to include most families.

  16.  We are also concerned however, that the new system should avoid the disincentive for women to form a new stable relationship or assume that a new partner should take on responsibility for providing for her children. Therefore ICC should be assessed on the income of both biological or adoptive parents, or on the custodial parent's income alone if they are separated.

  17.  The current disregard for child maintenance payments when calculating entitlement to the WFTC should be continued when the ICC is introduced. To give lone parents an incentive to co-operate with the child support agency, but also to ensure that children can rely on a certain level of financial support throughout the year.

Ability of the ICC to respond to changes in income

  18.  Fawcett believes that it is important to have a system which is sensitive to the needs of families but at the same time ensures that families are able to depend on a certain level of income over the year. We suggest that entitlement and amount of ICC paid should be calculated annually according to income as the basis of the system.

  19.  However given that the ICC will be an important source of income for low-income families, the DSS should be notified of any fall in income and payments should respond to this fall immediately. The same should be true of events such as death, divorce or birth of a new child, to avoid the current problems with the inflexibility of the Working Families Tax Credit.

  20.  With regard to an increase in income, we believe that the process could follow that of the Australian system, where small income changes are ignored and claimants are only required to notify the DSS if income rises by more than 10 per cent.

  21.  Lone parents and families with disabled children, should receive higher levels of the ICC in recognition of the additional costs they incur as a result of their circumstances.

 Childcare Costs

  22.  Childcare continues to be an important priority for many families and we welcome the recognition of the importance of providing childcare, if parents are to be able to work. Fawcett believe that the best way to ensure that families are able to access good quality and affordable childcare is through subsidise this at source, making payment to nurseries and childminders and linking payment to the number of childcare places given to low income families.

  23.  If the current system continues, Fawcett is keen to see the childcare tax credit paid as part of ICC. For many women, the transition into work is constrained by the difficulties of arranging childcare. If the childcare tax credit is paid as part of the ICC, mothers will be able to organise childcare whilst a job search is taking place and will also enable children to have secure and stable childcare arrangements through parents' employment transitions.

  24.  We would also like to see investigation of subsidy being more flexible, so that the large numbers of families who rely on grand parents, family members and friends to care for children, would be able to claim some subsidy[4].

September 2000

2   See work by Joseph Rowntree Foundation, Jan Pahl and others. Back

3   The Institute of Fiscal Studies estimates that around 20,000 women are likely to withdraw from the labour market as a result of the disincentive in the WFTC. (Green Budget 2000) Back

4   Research by the DfEE suggests that 64 per cent of children aged 0-2 are cared for by their grandparents and more than a third received care from another relative or friend. (DfEE 1999 Parents Demand for Childcare). Back

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2001
Prepared 22 March 2001