Average family should get £7,000-a-year cash boost to curb child poverty

Parents with two pre-school children would receive an annual payment of £7,400 a year under a radical plan drawn up by a major think-tank to tackle child poverty, with some struggling families getting more than £20,000 per year.

The plan, which will be put to the next government, is designed to ease the financial pressures on UK families where over 4 million youngsters experience hardship on a daily basis – around three in ten of all children.

The huge boost to family incomes would be achieved by front-loading child benefit payments so that money is only paid out to families when children are under the age of five – the time when family budgets are under the biggest strain and poverty is worst.Targeting child benefit on pre-schoolers means that the big uplift for young families can be delivered without any extra costs to the taxpayer.

The proposal from the Centre for Social Justice (CSJ) is the centrepiece of a bold three-part shake-up of the family support system designed to end the scourge of child poverty.It would be linked to two other far-reaching changes:

• Make the earnings threshold of £12,570 fully transferable between husband and wife or civil partners. This would boost family income by up to about £2,500 if one partner stayed at home to look after the children while the other partner went out to work.
• Pay childcare subsidies direct to parents so they can choose to spend the money on formal care (such as registered state nurseries) or informal care (help from family members or friends). This has 70 per cent support from parents, according to polling commissioned by the CSJ from Public First. In addition, expand the availability of free childcare from 39 weeks to 47 weeks.

Families who qualify for all three parts of the package – the higher targeted child benefit increases, a fully transferable 100 per cent marriage tax allowance, and the childcare payments – would see their annual income boosted by over £20,000.

The CSJ report says the three-part package, christened “Family Credit”, would be overall cost neutral to the taxpayer. Fully transferable personal tax allowances would cost about £3 billion a year and a front-loaded child benefit system would cost about £10 billion a year. But these costs are offset by the current untargeted child benefit Treasury budget of about £13 billion a year.

Expanding free childcare to 47 weeks a year and linked changes to the tax and welfare systems would cost nearly £6 billion a year – equal to the sum of money already allocated to free childcare in the 2023 Budget.