Increasing child benefit: five tests, five ticks? | CPAG

Increasing child benefit: five tests, five ticks?

Published on: 
14 May 2020
Written by: 

Jane Millar
Institute for Policy Research
University of Bath

Now is the time for some clear thinking about our systems of social security and social protection. With millions of people claiming support through universal credit, the importance of a functioning and adequate social security system is obvious. Getting support to people as quickly as possible has understandably been a priority. But we should also be looking to the future, to ensure that we build a resilient system with popular support. Child benefit has an important role to play in this. CPAG, supported by many other organisations, has made the case for an immediate increase in child benefit of £10 per child per week. Why should child benefit be increased? Having five tests seems to be all the rage, so let’s see how child benefit shapes up.

  1. Simplicity

This was one of the main arguments made for universal credit, that it would simplify a complex system. Simplicity in the benefit system is not necessarily a straightforward concept or easy to achieve in practice. But it is a popular idea or aspiration, so makes a good first test. And here child benefit scores very well indeed – it is simple in design, simple to understand, and simple to administer. The eligibility condition is responsibility for a child aged under 16 years, or 16 to 20 years old and in full-time education or training. The amount is flat-rate, £21.05 per week for the first or eldest eligible child in 2020/2021 and £13.95 per week for other children. HMRC is responsible for the administration, at a much lower unit cost than means-tested tax credits.

The pure simplicity of the system that was introduced from 1977 to 1979 has been somewhat watered down, with the introduction of the higher rate for the first or eldest eligible child in 1991 and from 2013 the higher tax charge for those receiving child benefit if one parent has income above £50k per year. And not all migrants will be eligible as this depends on the right to reside. But child benefit is still one of the simplest benefits in our system. Increasing the level would be straightforward to do, and not require new applications to be processed, as the system is already in place. Tick.

  1. Integrated in and out of work

Sticking with the arguments made for universal credit, this was sold by the Centre for Social Justice and the Coalition government as providing an integrated system of support that did not distinguish between those in and out of paid work. This would therefore act as a work incentive, and enable people to move in and out of work, and between jobs, without having to make a new benefit claim.

Child benefit already does this. It is paid regardless of employment status, and continues in payment as earnings change. It helps parents, including lone parents, to stay in employment, and reduces the risk of in-work poverty. Tick.

  1. Security

The name ‘social security’ is not an accident - one of the main purposes of the system is to help people to maintain financial security when faced with events and circumstances that threaten or challenge their incomes or livelihood. So this is an important test. As noted above, child benefit provides some income security through times when wages are lost or go down. It is a good fit with the challenges of working in the gig economy or in any work with irregular payment of wages. It also provides some income security through family change. Child benefit may be the only constant income source for lone parents at the point of family breakdown. More generally, because child benefit is usually paid to the mother, it provides women with a source of independent income which is especially important for those who are not employed and for those in, or seeking to escape from, situations of domestic financial abuse.

The importance of income security is increasingly recognised - knowing how much you will receive and when is an important element in budgeting, especially for families with low incomes. The constant and unchanging payment of child benefit provides important income security, even when much else changes. Tick.

  1. Life chances of children

Child benefit is spent on children, or on meeting family needs in ways that support children, so increases in child benefit do flow directly through to the children. This helps to meet immediate needs and to lay the foundations for the future. It is sometimes argued that means-tested benefits would be more effective for tackling child poverty, targeting the poorest for additional support. But universal child benefits/family allowances are an important element in reducing child poverty, as shown in international comparisons. And the child benefit take-up rate of around 93 per cent means that it is effective in reaching many children in poverty. Child benefit is a contribution from society as a whole to the costs of raising children, and improving their life chances, which is a benefit for all of our futures. Tick.

  1. Adequacy

Child benefit is a contribution to the costs of children; it has never met those costs in full. So the rate at which child benefit is paid is a political decision. But the level of child benefit was only raised twice in the past ten years, until the increase in April 2020. At the same time the triple lock on pensions has meant that a single person on the basic state pension has seen an increase of around 32 per cent over the past decade. If the triple lock had also applied to child benefit, the rate now for a first child would be about £28 per week, not far off the amount it would be with the additional £10 per week proposal. There is now a significant and rising gap between the current level of support for children and the minimum income standard, which is based on what the public think are the essential items that every family should be able to afford. So increasing child benefit should command popular support. Tick.

As William Beveridge wrote in his 1942 report, ‘A revolutionary moment in the world’s history is a time for revolutions, not for patching’. The very first item on his list of essential conditions for his proposed national insurance scheme was ‘children’s allowances’. The case that Beveridge made is not so different from the five tests above. Beveridge was proposing that national insurance benefits should be enough for subsistence, enough for people to live on. But for families with children, wages did not necessarily cover subsistence needs, because wages do not vary with the number of children. Without family allowances income out of work might exceed income in work, which would be avoided by ‘giving allowances for children in time of earning and not-earning alike’ (para 412). In addition, he also argued that society had an obligation to support families with children: ‘The foundations of a healthy life must be laid in childhood. Children's allowances should be regarded both as a help to parents in meeting their responsibilities, and as an acceptance of new responsibilities by the community’ (para 413). Both of these arguments remain compelling.

 

Finally, the costs of increasing child benefit are relatively low. Current expenditure on child benefit is about £12 billion per year, just five per cent of the total social security budget. About 12.7 million children get it, so £10 per child per week would add about £6.6 billion. This seems like a worthwhile investment, at a time when the impact of Covid-19 has challenged us all to think of better, fairer and more cohesive futures.

 

 

With thanks to Fran Bennett and Luke Martinelli for comments.