Select Committee on Social Security Second Report


The Social Security Committee has agreed to the following Report:—




1. The Government's plans for Integrated Child Credit (ICC), which involve a major re-structuring of means-tested benefits for children and the transfer of responsibility of key elements of financial support for low-income families from the Benefits Agency to the Inland Revenue, were outlined in the Budget statement in 1999[1] and confirmed in a Treasury document published in March 2000[2]. The introduction of ICC has been described by the Treasury as part of the "next generation" of tax credits, where there is scope to create a "radically new system".[3] It carries still further the Government's agenda of greater integration of tax and benefits, a subject in which the Committee has taken a keen interest, and ICC forms a key element in the Government's strategy to eliminate child poverty within a generation. As plans for the development of ICC get underway, it is important to consider what financial support will be provided for children, the structure of that financial support, whether what is provided is adequate and whether the administrative plans and timescale are achievable.

The Inquiry

2. In view of the announcement of the proposed date of implementation (2003) and the implied invitation to participate in a public debate, particularly on the amount to be paid under ICC, the Committee decided on 26 July 2000 to undertake an inquiry into the Government's proposals.

3. We invited interested parties to submit written evidence and then decided to take oral evidence from academics,[4] the Institute of Fiscal Studies (IFS), the Child Poverty Action Group (CPAG), Christian Action Research and Education (CARE) and a group of officials representing HM Treasury, Inland Revenue and the Department of Social Security (DSS).

4. At an early stage in our deliberations it was drawn to our intention that a similar system of Integrated Child Credit was already operating in Canada. We therefore paid a brief study visit to the Federal Government and others in Ottawa and to Provincial Governments and others in Saskatchewan and British Columbia. The visit, lasting less than a week, was invaluable in giving us a foretaste of how a similar system might operate in the UK and of the potential problems which might be encountered. An earlier visit to Australia in connection with another inquiry also provided valuable insights into the comparable systems there.

5. We wish to place on record our thanks to all those who submitted written evidence, gave oral evidence and assisted the Committee before and during the visit to Canada. We are most grateful for these most valuable contributions to our work.

The Government's plans

Wider context

6. Alongside ICC a new 'Employment Tax Credit' (ETC) will be created, which unlike Working Families Tax Credit (WFTC), will be payable to people without children as well as those with children. The objectives of the ETC will be to increase work incentives for low-paid workers by ensuring that they are better off in work than on benefit; and to relieve in-work poverty. The introduction of ICC and ETC in 2003 will take place against a background of considerable organisational change affecting significant parts of benefits and tax credits administration. During the financial year 2001- 2002, the work of the Employment Service and those parts of the Benefits Agency dealing with people of working age will be brought together in a new agency dealing with people of working age. The Minister of State for Social Security has described the change as "probably one of the biggest changes ever to be made in the machinery of government...Extracting the Employment Service and the Benefits Agency from the general system, enabling them to deal with a specific client group, is almost like planning a new Government Department. It will not be a five-minute job; it will take several years."[5] A separate centralised agency or "Mini-ministry"[6] dealing with all aspects of pensions and pensions policy, including the creating of a new 'pension credit,' will also come into existence in 2001-2002. The full administrative implications of these changes, involving the break-up of the Department of Social Security's largest agency, the Benefits Agency, are still being worked through. Parallel to these major changes is the introduction of fundamental reforms to the child support scheme from 2002. This will affect the work of the Child Support Agency, as well as creating knock-on implications for Income Support (IS) and Jobseeker's Allowance (JSA). Underlying all these changes is an immense programme of replacement of outdated information technology (IT) systems in the DSS, designed to eliminate benefit 'chimneys' and create a more integrated approach across benefits. One of the key questions is how all these changes will interact and be co-ordinated.

1   Budget 99, HM Treasury, March 1999, HC 298, para 5.13. Back

2   The Modernisation of Britain's Tax and Benefit System, Number Six: Tackling Poverty and Making Work Pay - Tax Credits for the 21st Century, HM Treasury, March 2000. Referred to hereafter in footnotes as 'HMT 2000'. Back

3   HMT 2000, para 2.21. Back

4   Professor Jane Millar, Department of Social and Policy Sciences, University of Bath; Dr Peter Whiteford, Former Policy Advisor, Department of Family and Community Services, Australia; Ms Sue Middleton, Centre for Research in Social Policy, Loughborough University; Professor John Veit-Wilson, University of Newcastle-upon-Tyne. Back

5   HC Deb 5 April 2000, vol 348 col 241, WH. Back

6   Description used by the Minister of State, HC Deb 5 April 2000, vol 238 col 241, WH. Back

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