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Session 2006 - 07
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Public Bill Committee Debates

Draft Child Benefit Up-rating Order 2007



The Committee consisted of the following Members:

Chairman: Mrs. Janet Dean
Brennan, Kevin (Lord Commissioner of Her Majesty's Treasury)
Cable, Dr. Vincent (Twickenham) (LD)
Clwyd, Ann (Cynon Valley) (Lab)
Dodds, Mr. Nigel (Belfast, North) (DUP)
Evennett, Mr. David (Bexleyheath and Crayford) (Con)
Goodman, Mr. Paul (Wycombe) (Con)
Grogan, Mr. John (Selby) (Lab)
Gummer, Mr. John (Suffolk, Coastal) (Con)
Iddon, Dr. Brian (Bolton, South-East) (Lab)
Jenkins, Mr. Brian (Tamworth) (Lab)
Lilley, Mr. Peter (Hitchin and Harpenden) (Con)
Murphy, Mr. Denis (Wansbeck) (Lab)
Newmark, Mr. Brooks (Braintree) (Con)
Primarolo, Dawn (Paymaster General)
Reed, Mr. Andy (Loughborough) (Lab/Co-op)
Ruddock, Joan (Lewisham, Deptford) (Lab)
Wills, Mr. Michael (North Swindon) (Lab)
Wyatt, Derek (Sittingbourne and Sheppey) (Lab)
Ms G McBride, Committee Clerk
† attended the Committee

Second Delegated Legislation Committee

Monday 19 March 2007

[Mrs. Janet Dean in the Chair]

Draft Child Benefit Up-rating Order 2007

4.30 pm
The Paymaster General (Dawn Primarolo): I beg to move,
That the Committee has considered the Draft Child Benefit Up-rating Order 2007.
The Chairman: With this it will be convenientto discuss the draft Guardian’s Allowance Up-rating Order 2007 and the draft Guardian’s Allowance Up-rating (Northern Ireland) Order 2007.
Dawn Primarolo: It is a pleasure, Mrs. Dean, to see you in the Chair.
In my view, the orders are compatible with the European convention on human rights.
Child benefit is payable to 6.7 million families for about 13 million children and young people. It delivers financial support to the vast majority of families in the United Kingdom. It provides almost all families with a worthwhile contribution towards the cost of bringing up their children and it is a vital element in our commitment to tackle child poverty.
The Government are committed to increasing child benefit in line with prices. The orders increase the rates in line with inflation. From 9 April, child benefit will be worth £18.10 per week for the first child and £12.10 a week for each subsequent child. As a result of the increases, the rate payable for the eldest child qualifying for child benefit remains more than 25 per cent. greater in real terms than in 1997. The guardian’s allowance will increase to £12.95 a week. With those increases, and the increases in child tax credits, we will be delivering even more support to families next year.
We remain committed to our long-term aim of eliminating child poverty within a generation, and halving it by 2010, and child benefit will remain a key part of that move. I commend the orders to the Committee.
4.32 pm
Mr. Paul Goodman (Wycombe) (Con): It is a pleasure, Mrs. Dean, to serve under your chairmanship for the first time.
The Opposition have no objection to the orders, but I ask the Paymaster General to enlighten us about the thinking behind the uprating. She said that child benefit is a vital element in the Government’s total benefit and tax credit system. She said that it is the Government’s view that it should rise in line with prices. It is that statement that I wish briefly to explore.
The pre-Budget report had remarkably little to say about child benefit when compared to the tax credit system. Page 104—one of the main pages dealing with tax, tax credits and benefits—included a significant section on tax credits but nothing about child benefit. On page 101, however, it made a significant announcement about child benefit, stating that every mother-to-be would become
“eligible for Child Benefit from week 29 of their pregnancy, so that women will be up to £200 better off”.
I have had some difficulty in finding the costings for that announcement page 226 of the Red Book. Will the Minister enlighten me—I may have been looking at the wrong page—as to where I might find the precise cost?
We know that some Ministers have been sympathetic—in one case before the person concerned was a Minister—towards the future of child benefit. The person I have in mind was no less significant a person than the Economic Secretary, who in The Guardian—so it must be true—on 7 August last year was reported as showing sympathy for the idea of raising child benefit for subsequent children through backing a report by the Fabian Society commission on child poverty. In summary, if the Minister could divulge more information about the strategic place of child benefit in relation to the Government’s thinking on child tax credit, I am sure that the Committee would be grateful.
4.35 pm
Dr. Vincent Cable (Twickenham) (LD): May I also express my pleasure on serving under your chairmanship, Mrs. Dean? I have little to say about the orders. We have regular discussions about uprating and the points that we all make are the same. There are two main points. The first simply reflects what the Conservative spokesman has said about the vexed issue of the differential between younger and older children. There are economies of scale in families—it is hard not to get personal when talking about families, but I guess that there are such things. Does the differential reflect some objective measure of the relative costs of older and younger children, or are we simply perpetuating an historical benchmark that has arisen for entirely arbitrary reasons? Does the differential have any basis in social surveys of families or does it just happen to be there? My instincts tell me that we should try to narrow the differential between older and younger children, but, clearly, from the Treasury’s point of view that needs to be done in an expenditure-neutral way. It could be done over time or in conjunction with child tax credit reforms, but I would be grateful for a stronger justification than we currently have for maintaining a differential between the oldest and younger children.
Secondly, we must realise that it is logical that if some benefits are indexed to inflation and others to earnings, the latter will gradually grow in importance. We know that the Government intend to use tax credits more and child benefit less as part of their anti-poverty strategy and we do not need to discuss the philosophical arguments of that, but the inevitable consequence is that more help for children will be targeted or mean-tested, which has benefits in terms of targeting and disadvantages in terms of creating disincentives through withdrawal rates. In conjunction with what the Minster says, we should simply note for the record that uprating in line with prices rather than earnings causes the benefit to become progressively less important over time relative to child tax credit.
4.38 pm
Dawn Primarolo: The facts do not bear out the propositions that have been made. I said in my opening remarks that child benefit for the first child is now25 per cent. higher in real terms than in 1997. The hon. Member for Wycombe is quite right that there was a tendency under the Conservative Government for child benefit to go out of fashion. In fact, that would be an understatement; they froze it and were prepared to allow it to wither on the vine. It was this Government who, after being elected in 1997, took an active role in bringing child benefit and its real value back to its current position of importance.
I also said that the Government’s strategy is to halve child poverty by 2010 and eradicate it in a generation. However much the Opposition may like to implicitly criticise that objective, people must receive more money otherwise the gap cannot be closed and people and children cannot be lifted out of poverty. Although recognising the importance of child benefit and its continued contribution to families, the Government recognise that they need to do much more and the tax credit system is part of that.
Let me explain the rationale for the higher rate of child benefit for the first child. Those of us who are slightly older should perhaps cast our minds back even further to the time when no such payment was made for the first child under the old family allowance, which preceded child benefit. In 1991, it was recognised that increased costs are inevitably associated with the first child in a family because they are the first child, and the higher rate was introduced at that time in recognition of the fact that the birth of the first child has a much greater impact. That is not to say that a second, third or fourth child does not also have a financial impact on a family, but the first child has the greatest impact. That is the reason for the higher rate, which has been maintained.
There has been and is a campaign, to which the hon. Member for Wycombe referred, to raise child benefit rates for all children to the higher level. The key question that we will examine in considering the proposals that have been put to the Government is whether, in committing public finance to that extent—it would be a very expensive increase—the policy impact would be sufficient. Could more children be lifted out of poverty in that way than by using other levers?
As my right hon. Friend the Chancellor of the Exchequer made clear when he announced the policy intention to introduce child benefit at the same point as maternity benefits come in—at 29 weeks—we want to address other causes of poverty and failure to thrive among children. The reason is often lack of finance on the part of the expectant mother. We have declared that measure a sensible mechanism for child benefit, thus enshrining it even further as an important principle to follow. On the question of extending it to those mothers, an initial figure has been given. I shall find the exact reference for the hon. Member for Wycombe. I think that we are talking about some £120 millionin 2009-10. We are costing that on the basis and understanding that we are trying to use further levers, but child benefit is an appropriate lever to help to achieve the complex target of dealing with child poverty.
Those are the Government’s reasons and rationale for our approach to the issue. It is a matter for great celebration that the present Government have been committed to enhancing and developing child benefit, given that the previous Government were determined to destroy it. On that basis, I commend the orders to the Committee.
Question put and agreed to.
Resolved,
That the Committee has considered the draft Child Benefit Up-rating Order 2007.

DRAFT GUARDIAN’S ALLOWANCE UP-RATING ORDER 2007

Resolved,
That the Committee has considered the draft Guardian’s Allowance Up-rating Order 2007.—[Dawn Primarolo.]

DRAFT GUARDIAN’S ALLOWANCE UP-RATING (NORTHERN IRELAND) ORDER 2007

Resolved,
That the Committee has considered the draft Guardian’s Allowance Up-rating (Northern Ireland) Order 2007.—[Dawn Primarolo.]
Committee rose at sixteen minutes to Five o’clock.
 
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