Comprehensive spending review 2007
What it needs to deliver on child poverty

Maximise the contribution of child benefit within family support

Within the package of financial support to families with children, the balance between money provided through the twin foundations of child benefit and means-tested child tax credit needs to be right. CPAG recognises that focusing maximum resources through the means-tested tax credit is driven by the desire to maximise the impact of limited resources. Still, it is important to point out that universal child benefit retains a critical role in protecting all children from poverty.

As part of the Make Child Benefit Count campaign,48 CPAG has been calling for the subsequent rate of child benefit for second children to be aised to the first. This would increase the role of child benefit, rebalancing the twin foundations of financial support for children, and has been modelled to lift between 250,000 and 300,000 children out of poverty.49

To rely too heavily on means-tested policy may be a tactical error for a number of reasons laid out in Child Benefit: fit for the future, which points out the following.

Simplicity

Child benefit is easy to claim and only has to be claimed once for each child, the qualifying rules are simple, and its amount and structure do not change as children get older. Its 'costs of compliance' are, therefore, low for claimants. It does not distinguish between lone parents and couples, married or unmarried parents, or those in or out of paid employment. In 2004/05, only 1.05 pence in the pound was spent on administration costs, compared with some 3 pence in the pound spent on managing and paying child tax credit.50 At a time when the Government is actively investigating the possibilities of simplifying the benefits system, child benefit could be seen as a model.

Take-up

Child benefit has almost universal take-up, with the Government estimating this recently at 98 per cent. The Government has made strenuous efforts to boost the take-up of means-tested child tax credit by removing some of the stigma of claiming, but has still not managed to raise the take-up to the same level as universal child benefit.51

A ladder out of poverty

Child benefit helps provide a ladder out of poverty because it is not reduced when other income goes up. It does not contribute to the unemployment trap - the situation in which people may be little or no better off in work than out - because it is paid at the same level whether a family has a parent in employment or not. This is not the case with child tax credit. Tax credits still contribute to the poverty trap - the situation in which people may be little or no better off earning additional income - because they are reduced (along with means-tested benefits, such as housing benefit and council tax benefit) when other family income increases when a family has a parent already in employment.

Family fluidity

Child benefit is paid to the main carer in couples regardless of the resources of the partner. Consequently, it 'follows the child' through changes in the family unit without being reassessed. This makes it a thoroughly modern benefit - and is different from child tax credit, for which a new claim must be made with any change in partnership status.

Administrative problems

Child benefit is not subject to the same sort of administrative problems that have plagued tax credits. Families need a constant income despite changes in circumstances, such as at the point of relationship breakdown. Child benefit is more likely to provide seamless support than complex, means-tested tax credits which need to be regularly reassessed - thereby generating additional paperwork and possibly delays at times when families are under considerable stress.

Sustainability

Child benefit is well recognised and popular. It has a political ability to 'stick', and though it lost significant value over the 1980s and 1990s it remains a well regarded, well functioning benefit around which an effective political campaign for improvements in the living standards of children can be built. Because it goes to all families and is not incometested it represents a social contribution to the additional costs of children, and their benefit to society. Furthermore, income-tested credits presuppose that deep divisions will continue in our society. A universal benefit - like child benefit - that assumes a world free of child poverty is the most suitable and sustainable way to eradicate child poverty.

Cost

The central argument against child benefit is its cost. However, while it is certainly expensive, it is not necessarily true that taxpayers would not pay for the increase. It is very possible that the pressures on the Government to resist additional taxation are actually greatest when benefits and tax credits are provided only to a small - and poor - group with limited political influence. Spending is politically easier to justify when a larger proportion of taxpayers benefit directly from it. CPAG believes that, because of its universality, there is a clear and compelling argument to maximise the role of child benefit within the balance of financial support to children and families.

Notes

48 See www.makechildbenefitcount.org
49 D Primarolo MP, Written Parliamentary Answer to David Laws MP, 25 October 2006
50 See note 46
51 Take-up of working families’ tax credit was 62-65 per cent in the first full year, 2000/01, and reached 72-76 per cent in its last year of operation, 2003/03. HM Revenue and Customs, Child Tax Credit and Working Tax Credit: take-up rates 2003-04, 2006

Comprehensive spending review 2007
What it needs to deliver on child poverty

Contents page
Introduction
The Government’s record
What should the spending review deliver?
Provide most for those children at greatest risk of poverty
Work towards better jobs, not just more jobs
Ensure the safety net protects families against poverty
Maximise the contribution of child benefit within family support
Introduce free at the point of delivery good-quality childcare
Make the reduction of child poverty central to the new child support policies
Make education truly free at the point of delivery
Provide benefit entitlement to all UK residents equally, irrespective of immigration status
Reduce the disproportionate burden of taxation on poorer families
Improve the quality of delivery and gear it to the needs of the poorest families
Notes

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