APPENDIX 3
Memorandum submitted by the Fawcett Society
(ICC 06)
SUMMARY
— 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.
TACKLING CHILD
POVERTY
— 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.
STRUCTURE OF
THE ICC
— 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.
PAYMENT OF
CHILDCARE TAX
CREDIT
— 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.
SUBMISSION
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
Introduction
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.
REDUCING CHILD
POVERTY
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
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