Child Benefit
66. Child Benefit is perhaps the best known universal
benefit. In contrast to means-tested tax credits, it is available
to anyone bringing up a child or young person and take-up is estimated
at around 98%. In Scotland, it provides support for 600,000 families
and 1 million children.[76]
As part of the 2007 Budget, the Chancellor of the Exchequer announced
an increase in the weekly rate of Child Benefit for the eldest
child to £20 in April 2010.[77]
At the time of writing, the rate of Child Benefit was £18.10
a week for the eldest child and £12.10 a week for each additional
child.[78]
67. Some of our witnesses argued that increases in
the rate of Child Benefit would represent the greatest contribution
to reducing child poverty. Professor Adrian Sinfield of the University
of Edinburgh said:
There is a strong argument for saying that the amount
of resources going to children should be increased. There is also
a strong case for saying that the element which goes to child
benefit should be increased because that goes to people without
any of the problems of claiming and reclaiming which have beset
tax credits.[79]
He went on to suggest that the increased cost of
administering a means-tested system might better be spent in a
higher level of universal benefit: "If you think of the cost
of Child Tax Credit and you add on all the overtime and all the
additional problems which came from trying to introduce it in
a cheap way, you would come up with a very big figure. You could
then ask how much of it [could have] been given out in child benefit".[80]
68. The Child Poverty Action Group Scotland supported
this view. They cited research in support of a higher level of
universal benefits:
The limitations of targeted approaches to tackling
child poverty are also becoming apparent. Far too many families
in poverty miss out on, or have to repay, vital tax credits; parents
are still unable to access affordable childcare because they fall
outwith current targeted initiatives; and tens of thousands of
poor children don't receive free school meals. A 2005 UNICEF report
on Child Poverty in Rich Countries highlighted the problem
targeted social expenditure creates across the developed world
and concluded that benefits universally provided, though apparently
more expensive, can avoid the poverty traps targeting creates.[81]
69. An argument against increasing the level of universal
Child Benefit is the fact that the well-off would gain as much
money as the poor. Nevertheless, some witnesses defended a rise
in child benefit on the grounds of "social justice".
Dr Paul Dornan, Head of Policy at the Child Poverty Action Group
said that an extra £5 a week might make a significant difference
to a poor family:
In a numeric way, if you are looking at the benefit
that reaches the most children in poverty it is child benefit.
It is not means tested. If you looked at income support or child
tax credit, though they are more redistributive in the way in
which it is described in pure financial terms, they miss out a
number of children. If you are looking at getting it, you might
argue that it is more efficient in a financial sense to go down
a selective route; but it is more effective in social justice
terms at reaching them to have an element of universality in there.
[…] Obviously it is a balance in terms of how you are looking
at these things. We are not suggesting that we would argue for
the replacement of child tax credit with child benefit. We are
however arguing for a rebalancing of that financial support towards
child benefit.[82]
Professor John Veit-Wilson of Newcastle University
agreed:
…objectors to income maintenance policies which
appear to benefit all citizens, even those "who don't need
them", should keep in mind that all political parties accept
fiscal welfare expenditure as unproblematic, even though tax allowances
go to people with the highest incomes and are in fact worth even
more to them than to people with lower ones. If the so-called
universal benefits such as tax allowances or Child Benefit are
more effective in targeting, and more efficient in administration,
than are means-tested benefits which people find demeaning, then
they should be preferred.[83]
70. The
UK welfare system today is a mixture of universal and targeted
programmes, embodied in the different forms of support provided
by Child Benefit and tax credits. Our inquiry has found evidence
that children in the poorest families may not be reached by some
of the current government policies, which focus on means-tested
benefits and employment. In this context, increases in Child Benefit,
which has a high take-up and is universally available, seem attractive.
It is undeniable, however, that increases in Child Benefit would
also go to rich families. The Government needs to consider carefully
whether there is a way to reach the poorest families through a
targeted benefit, or if universal support is the only reliable
method of raising incomes amongst this group.
71. Other witnesses suggested that the rate of Child
Benefit for second and subsequent children should be brought up
to that for the first child. Mr John Dickie, Head of the Child
Poverty Action Group Scotland told us that that larger families
were at greater risk of poverty.[84]
He thought that an equalisation of the rate of child benefit "would
make a significant contribution to lifting significant numbers
of children out of poverty and would also be very straightforward
and simple. There is a high take-up and it reaches those children
we want it to reach."[85]
In addition, some witnesses viewed an unequal level of benefit
as inequitable. Save the Children argued that there was "a
case in its own right for equity in the treatment of different
children in our financial support system."[86]
They estimated that the cost of equalising Child Benefit for second
and subsequent children would be £1.7bn in the UK as a whole
and that this would lift 250,000 children out of poverty.[87]
72. It could be argued that equalising the rate of
child benefit for second and subsequent children might create
an incentive encouraging larger families, meaning that more children
would be born into poverty. We put this argument to our witnesses.
Mr Jason Strelitz, UK Policy Advisor on Poverty at Save the Children
thought that the amount of money involved was not enough to create
such an incentive. He said, "We are talking about £5.70
extra per child per week. It is not very much money to incentivise
someone to go out and have another baby".[88]
73. We asked Ministers whether they would consider
equalising the rate for second and subsequent children. Rt Hon
Jane Kennedy MP said:
We do recognise the greater risk of poverty for children
in larger families. We accept that there is a risk. We estimate
that 19 per cent of one child families, 18 per cent of two child
families and 26 per cent of three child families and 40 per cent
of four child families is the measure of risk. The risk of poverty
for families with four or more children has fallen the most quickly
of any of those groups, by 30 per cent since 1997 compared to
the risk for all children which fell by 18 per cent. When we
committed in 2004 to the child poverty review, we undertook that
we would look to improve this position further. It is possible
to say now that the risk of poverty has fallen most quickly for
large families, largely due to the increasing generosity of the
per child element of child tax credit. I know that there are representations
being made. We keep all of these matters under review. I know
that is a stock phrase but it is nonetheless true.[89]
74. Children
in larger families are at greater risk of poverty. Our evidence
suggests that equalising the rate of Child Benefit would help
many of the poorest families. We are attracted to this idea but
consider that further research is needed to establish whether
this is the most practical way of reducing poverty in large families.
75. In order to provide further help for the poorest
families, Save the Children have argued for a new seasonal benefit
in the form of lump sum payments to families in summer and winter,
which would be payable to those in receipt of income support,
Jobseeker's Allowance or the maximum Working Tax Credit. They
estimated that this would lift 45,000 children in Scotland out
of poverty and benefit 300,000 Scottish children in total.[90]
Mr Jason Strelitz said:
…having a lump sum payment allows low income
families the freedom that week-to-week payments do not, so when
you are subsisting on a low income from week to week there is
a whole range of elastic items that small increases in your weekly
income can be spent on, whether it is a bit more food, money for
activities such as swimming or a trip to the launderette or whatever.
There is a whole range of things that it can go on. Families in
poverty, specifically families in severe poverty, find it almost
impossible to save any money, and therefore they do not have the
lump sum payments to pay for the large one-off items to make some
choices about how they use their resources. We think there is
a strong case, based on that, for a lump sum payment, specifically
at the two times of year that our research has identified are
the times when low income families struggle.[91]
76. We
have had representations to consider seriously the option of establishing
a twice-yearly seasonal grant for families in receipt of Income
Support, Jobseeker's Allowance or the maximum Working Tax Credit.
Throughout this Report we have emphasised the importance of simplifying
the benefits system. We are concerned that establishing a new
seasonal grant might increase the bureaucracy involved. We do
believe that resources should be devoted to helping low income
families to cope with large items of one-off expenditure which
might otherwise push them into poverty. It might be possible to
achieve this by allocating additional resources to the Social
Fund, as recommended in our previous Report.
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