Child benefit: fit for the future
60 years of support for children

Two: Background

Child benefit: the facts
The case for supporting children
Child benefit and child poverty

Notes

Child benefit: the facts

• The vast majority of developed countries have some form of cash benefit and/or tax arrangement to take account of the presence of children in households, which is not paid only to those on low incomes. This kind of support is usually called ‘universal’. It is generally seen as part of family policy, as well as social security or tax policy.
• In the UK, this form of payment is represented by child benefit. After retirement pension, child benefit is the most commonly received benefit in the UK, according to the 2004/05 Family Resources Survey, with 28 per cent of households in receipt of it.1 In that year, child benefit cost some £9.6 billion compared with just over £7 billion in 1996/97.2 Child benefit provided the majority of all support for children from its introduction in the late 1970s until very recently.3
• Child benefit is usually paid to the mother.4 The details of this arrangement are explained in Supporting Families: the financial costs and benefits of children since 1975.5 In 2002, 95.5 per cent of child benefit ‘customers’ were women, according to the Government.6
• The amount of child benefit paid does not depend on the age of the child. It is paid to virtually all children in the UK aged under 16, and to those aged 16 to 19 who are in full-time non-advanced education or some other specific circumstances. Child benefit is now paid at the same rate to lone parents and two parent families (there used to be an addition for lone parents, called one parent benefit, but this is being phased out).
• But since May 2004, child benefit (and child tax credit) claimants must also have a ‘right to reside’ in the UK under national or European Community law.7 This means that asylum seekers and those with work permits, for example, are no longer entitled to claim child benefit. CPAG now describes child benefit as ‘near universal’, rather than fully universal, because of these immigration restrictions.8
• Child benefit is ignored when child tax credit is calculated, so it does not reduce the amount of child tax credit paid. There is no legal obligation on the Government to uprate child benefit each year in line with prices or earnings increases. Nevertheless, in practice the convention has been to uprate it in line with prices, with some exceptions (see below).

The case for supporting children

“In 1945, it was decided that because of the importance of the childrearing role of the family to the future of the whole community, the community should share with parents the cost of children, through family allowances. Child benefit has now taken over this role.”
JC Brown, Child Benefit: options for the 1990s, Save Child Benefit, 1990, p10

Why should parents be helped with the costs of children? A good place to start is the rights of children themselves. Article 27 of the United Nations Convention on the Rights of the Child declares that children have a right to ‘a standard of living adequate for the child’s physical, mental, spiritual, moral and social development’. It makes clear that parents or others responsible for the child have primary responsibility, but that governments should assist parents.9 This makes it clear that society as a whole has a responsibility towards children.

Other arguments which support the payment of child benefit and other similar benefits include the following.

• Horizontal redistribution. Since those with children have higher costs than those without, they need additional support at whatever level of income they live on, in order to equalise the tax contribution between those with and those without children.
• Lifecycle redistribution. Most people have children at some point, and that is a time when needs are higher and income tends to be lower; so child benefit helps to redistribute resources (and the tax contribution) over the lifecycle.
• Intergenerational redistribution. Since everyone – childless people, as well as those with children – will benefit in due course from the productivity of children being brought up now, society should share the cost of bringing up those children with their parents, as an investment by us all in the next generation.
• Value placed on children. A payment to all children is concrete evidence of the value placed on children and child-rearing by society. In 1999, the Chancellor of the Exchequer described children as 20 per cent of the population but 100 per cent of our future.10

In the 1980s, there was a widespread view that children were equivalent to a private consumption choice of their parents.11 They were, it was argued, no more deserving of public support than, say, the choice to have a yacht or a second holiday. But to think of children in this way devalues them as human beings with their own human rights.12 As Eleanor Rathbone – who fought for family allowances for over two decades, and died just before they were introduced – wrote in 1940:

“Children are not simply a private luxury. They are an asset to the community, and the community can no longer afford to leave the provision for their welfare solely to the accident of individual income.”13

We seemed then to have forgotten what she had said so eloquently. Now, there is instead an emphasis on investment in children, seeing children as precisely such an ‘asset’. This means that they are seen more as a ‘public good’, rather than a private consumption choice.14 Of course, there are also dangers in going too far in this direction. Children may be seen more in terms of ‘human becomings’ in the future – their potential value to society, after they have become adults, and can contribute productively – rather than ‘human beings’ in the present.15 The experience of childhood itself may be undervalued. But it is nonetheless a more positive attitude towards children, that recognises the importance of supporting society’s future development, and that provides the basis on which to build a case for generous levels of support:

“If children can be viewed, at least partly, as a public good, then shifting some of their cost to society at large can be seen as promoting distributional justice.”16

A report about child benefit written in 1990 put the issue clearly:

“Having children is an individual decision and must remain so, but to the extent that this choice is governed by economic considerations, policies should seek to ensure that the choice is not weighted against children.”17

Child benefit and child poverty

These arguments are about the case for supporting all children. It is in the area of financial assistance that this case is most often queried; universal services for children, such as education and health care, are not usually questioned. CPAG, like many other organisations working against child poverty, is well aware that child benefit as a universal benefit has a role not only in supporting all children but also in protecting children against poverty. And it not only supports children living in families already in poverty, but also plays a vital role in helping to prevent poverty and deprivation, rather than just trying to patch things up when they have already gone wrong.

The importance of this preventative role is underlined by research that looked at payments contingent on the presence of children in European countries (the 15 member states before the accession countries joined). This research demonstrates that such payments make a significant contribution to poverty reduction in one group of countries with low rates of child poverty – and these countries mainly make use of universal benefits like child benefit and tax concessions, ‘though their systems are not particularly targeted on low-income children they nevertheless perform well in protecting children from poverty’.18 Countries which target payments on children in low-income households, on the other hand, may have similar levels of expenditure, but tend to have higher rates of child poverty.

The Work and Pensions Select Committee endorsed this:

” ... it is notable that countries who deliver financial support for children predominantly via non-means-tested benefits, for example, Denmark, Norway and Luxembourg, have comparatively low levels of child poverty.”19

Though it added, ‘but at the cost of high taxation.’

The Commission on Families and the Wellbeing of Children also put the case for ‘entrenching a universal system of financial support for parents [in the UK]’ in the context of child poverty in its report.20 This was based on the broader argument that adequate support for children in families on lower incomes was related to such universal support:

“The Commission is of the view that the social solidarity required to sustain adequate protection for the worst-off children is strengthened if some significant benefit is extended to every family.”21

CPAG’s manifesto to eradicate child poverty in 2005 called for the combined value of child tax credit and child benefit to be uprated at least in line with the fastest growing of either prices or earnings. But it added: ‘The element of this that is child benefit ought to be maximised’. This report explains why.

Notes

1 R Chung and others, Family Resources Survey: UK 2004-05, Department for Work and Pensions, 2006
2 House of Commons Hansard, Written Answers 30 March 2006, col 1111W
3 S Adam and M Brewer, Supporting Families: the financial costs and benefits of children since 1975, The Policy Press for Joseph Rowntree Foundation, 2004
4 Information about benefits and tax credits in this report is taken from CPAG’s Welfare Benefits and Tax Credits Handbook 2006/07, but the summary here should not be taken as a full or definitive interpretation of the law.
5 See note 3
6 House of Commons Hansard, Written Answers 17 July 2002, col 295W
7 House of Commons Hansard, Written Answers 2 May 2006, col 1438W. An EU national will generally only have a right to reside if s/he is working in the UK, or has done so for some time. If s/he is not working in the UK, an EU national will generally only have a right to reside if s/he has sufficient resources or income to avoid becoming a burden on social assistance (basic means-tested benefits such as income support)
8 Child Poverty Action Group, Ten Steps to a Society Free of Child Poverty: CPAG’s manifesto to eradicate child poverty, CPAG, 2005
9 UNICEF, ‘Child Poverty in Rich Countries, 2005’, Innocenti Report Card No. 6, UNICEF Innocenti Research Centre, 2005
10 For some useful summaries of the arguments in favour of supporting all children, including some or all of these, see J Brown, Child Benefit: investing in the future, CPAG Ltd, 1988; J C Brown, Child Benefit: options for the 1990s, Save Child Benefit, 1990; T Ridge, ‘Benefiting Children? The challenge of social security support for children’ in J Millar (ed), Understanding Social Security: issues for policy and practice, The Policy Press, 2003; S Adam and M Brewer, Supporting Families: the financial costs and benefits of children since 1975, The Policy Press for Joseph Rowntree Foundation, 2004; and D Hirsch, Financial Support for Children: defining responsibilities and adequacy, Report to the Commission on Families and the Wellbeing of Children, National Family and Parenting Institute, 2005
11 A Dilnot, J Kay and C N Morris, The Reform of Social Security, Oxford University Press, 1984
12 J Brown, Child Benefit: investing in the future, CPAG Ltd, 1988
13 E F Rathbone, The Case for Family Allowances, Penguin, 1940
14 G Esping-Andersen with D Gallie, A Hemerijck and J Myles, Why we Need a New Welfare State, Oxford University Press, 2002
15 R Lister, ‘Investing in the Citizens of the Future: transformations in citizenship and the state under New Labour’, Social Policy and Administration 37:5, 2003, pp427-443
16 M Matsaganis and others, Child Poverty and Family Transfers in Southern Europe, Euromod Working Paper EM2/04, 2004, p16
17 J C Brown, Child Benefit: options for the 1990s, Save Child Benefit, 1990, pp15-16
18 M Corak, C Lietz and H Sutherland, The Impact of Tax and Transfer Systems on Children in the European Union, Innocenti Working Paper 2004-05, UNICEF Innocenti Research Centre, 2005, piii
19 House of Commons Work and Pensions Select Committee, Child Poverty in the UK, Second Report, Session 2003-04, HC 85, The Stationery Office, 2004, para 203
20 Commission on Families and the Wellbeing of Children, Families and the State: two-way support and responsibilities, The Policy Press, 2005
21 See note 20, Executive Summary, pp17-18

Child benefit: fit for the future: CPAG policy briefing

Contents page
Executive summary
1: Introduction
2: Background
3: The importance of child benefit
4: The history of child benefit: key issues and challenges
5: The value of child benefit over time
6: Policy options
7: Conclusions
Appendix

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