Select Committee on Social Security Second Report


    (a)  We value the role of universal Child Benefit and believe it should continue to play a substantial role in supporting the children of this country. We welcome the commitment from the Chancellor to Child Benefit. We recommend that the Government takes steps to ensure that, as integration develops a separately identifiable universal element, presently Child Benefit, is preserved. (Paragraph 19)

    (b)  We believe that the introduction of Integrated Child Credit provides an opportunity for a long overdue review of the level and structure of financial support for children in Britain which should not be missed. (Paragraph 22)

    (c)  We recommend that the Government should establish a specific budget to fund a variety of research by different social scientists into the levels of income which are sufficient to keep families with children out of poverty. (Paragraph 24)

    (d)  We also recommend that the Government convenes an ongoing working party involving policy makers, academics and other interested parties to assist it to devise publicly acceptable measures of the levels of income needed to avoid poverty. (Paragraph 25)

    (e)  Given that ICC is creating a framework where all families will be part of the same system, we believe there is a case for working towards a maximum award of ICC, paid to families on the lowest incomes, which reflects what parents on average need to spend on their children, an amount which is then tapered away as income rises. (Paragraph 30)

    (f)  We recommend that the disabled child premium within IS/JA and the disabled child credit within WFTC/DPTC be incorporated within Integrated Child Credit. (Paragraph 31)

    (g)  We recommend that ICC rates do not distinguish between first and subsequent children, and that levels of Child Benefit between first and subsequent children be equalised. (Paragraph 35)

    (h)  We recommend that there should be no age-related element in the rate of child credit per child. (Paragraph 37)

    (i)  We welcome the 'portability' of ICC for families moving into work, whereby the maximum rate of ICC will be retained across the no work/work divide. It will enable resources to go to children in the poorest families whilst providing their parents with certainty of income if they move into low paid work. (Paragraph 40)

    (j)  We have concluded that in order to reduce child poverty, assist the transition into work, and aid administrative simplicity there are strong arguments for maintaining a wide band of income across which maximum ICC is paid, before it starts to be withdrawn. (Paragraph 41)

    (k)  We are pleased that the Government is looking at the interaction of ICC and Housing Benefit, but consider that the aim should be to improve marginal deduction rates rather than simply not make them worse than they are at present. (Paragraph 45)

    (l)  We repeat the recommendation made in our report on Housing Benefit that consideration should be given to removing as many people as possible from the necessity of making claims for Housing Benefit alongside ICC, either by increasing the earnings disregard or examining the possibility of including a housing credit as part of the reforms of tax credits in 2003. (Paragraph 46)

    (m)  We have concluded that the best model for ICC is likely to be a relatively unresponsive structure, with fixed awards of at least six months duration, but with a safety net of 100 per cent ICC when income drops to ICC/JSA level. Otherwise there should be adjustment only for major changes in family circumstances such as the birth of a child; a child leaving the household; a new partner; or loss of a partner. Our conclusion that there should be a relatively unresponsive structure reinforces our earlier recommendation that there should be a wide band of income across which maximum ICC is paid. (Paragraph 52)

    (n)  We have concluded that abolition of the current capital rules which apply to benefits and tax credits in favour of rules which take into account income from capital may not produce all the simplifications that could be achieved. (Paragraph 57)

    (o)  Whatever changes are made to the treatment of capital for ICC, we recommend that the same changes are applied to adult benefits and tax credits. (Paragraph 58)

    (p)  We recommend that, in designing the next generation of tax credits, the Government moves closer to aligning definitions of income for tax credit purposes with those used for income tax. (Paragraph 60)

    (q)  We recommend that child support payments are ignored for ICC purposes. (Paragraph 61)

    (r)  We repeat a recommendation made in our earlier report on the Child Support reforms that all parents with care in receipt of Income Support or income-based Jobseeker's Allowance should be permitted to benefit from the £10 child maintenance premium from the date of commencement of the reforms. (Paragraph 62)

    (s)  We consider there is a case for ignoring payments of statutory maternity pay and maternity allowance for ICC purposes. (Paragraph 63)

    (t)  We favour the WFTC and DPTC model for the treatment of Child Benefit, not least because we know from direct experience that the reduction of benefit to take account of Child Benefit is a perpetual source of complaint among poor families. (Paragraph 64)

    (u)  There is little doubt that support for the introduction of ICC would be badly affected if means-tested benefits for children went down at the point of change. We therefore urge the Chancellor to make sufficient funds available to ensure that this does not happen. (Paragraph 64)

    (v)  We recommend that a component for school dinners be separately identified within the ICC calculation and that the Government should give consideration to extending entitlement to other 'passported' health and education benefits, Social Fund payments and 'Sure Start' Maternity Grant to families in receipt of maximum ICC. (Paragraph 65)

    (w)  In addressing the question of the interaction of ICC with Housing Benefit and Council Tax Benefit, the effect of ICC on entitlement to maximum benefit is a matter to which urgent and careful thought must be given to avoid creating large numbers of 'losers', thus undermining the credibility of ICC. (Paragraph 66)

    (x)  Since much of the detail has yet to be announced, we believe it would be sensible to provide a further period of public consultation on the details of ICC once they have been finalised. (Paragraph 68)

    (y)  The Committee welcomes the potential offered by ICC for the development of a more seamless approach to the collection and transmission of information between agencies. (Paragraph 69)

    (z)  The Committee agrees with the logic of the Secretary of State's argument that it makes sense for the different components of money that go to children to be paid in one income stream, and therefore believes that different elements such as Child Benefit and ICC should not be paid by different Departments. It is very worrying that plans to move Child Benefit administration to sit alongside ICC appear to be so uncertain and ill-defined at this stage. (Paragraph 71)

    (aa)   We recommend that the introduction of ICC should only take place once computer systems at the Inland Revenue, the Child Benefit Centre and the new Working Age Agency are fully compatible and operational. (Paragraph 74)

    (bb)  We recommend that the new rules for tax credits should not consist merely of multiple amendments to social security benefit legislation. Rather, both the primary and secondary legislation relating to tax credits should be drafted, as far as possible, as stand alone legislation. (Paragraph 76)

    (cc)  We recommend that, in planning the legislative timetable for ICC and ETC, sufficient time is allowed to enable careful drafting of both primary and secondary legislation in plain English. (Paragraph 77)

    (dd)  We invite the Government to give an unequivocal undertaking that ICC will not be implemented unless and until the administrative framework and IT systems to support it are fully operational. (Paragraph 79)

    (ee)  We believe that the introduction of a simple annual tax form to complement existing information held by the Inland Revenue would enable people to report unearned income; the presence of children and if appropriate, the existence of a partner. It would provide the required balance between simplicity and eliciting the basic information and we recommend the consideration of such a system. (Paragraph 82)

    (ff)  We welcome the proposal that ICC should be paid to the main carer. (Paragraph 83)

    (gg)  We recommend that recipients be given a choice concerning the intervals at which they are paid: (for example fortnightly, monthly, annually), and that the main carer be given the option of payment otherwise than electronically, if he or she does not have a bank account. (Paragraph 84)

    (hh)  We conclude that although ICC is a welcome step towards a simpler system, there is still a considerable way to go to create a tax credit and benefit system which is easy to understand and easy to use from the recipient's perspective. (Paragraph 85)

    (ii)  It is important to know the characteristics of those people who are not claiming ICC, to establish whether there are trends in family structure; income or regions, so as to enable the more accurate targeting of take-up campaigns. We recommend that these patterns of lack of take-up are analysed by the Government. (Paragraph 87)

    (jj)  We agree that the take-up of ICC will be vital to its success and that active encouragement to claim should begin as soon as a child is born. We therefore recommend that Integrated Child Credit application forms be sent to parents of newly-born children alongside those for Child Benefit and that data matching between Child Benefit and Income Tax records should be regularly used, as in Australia, to identify likely claimants and to encourage them to claim. (Paragraph 90)

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