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.
“The CSJ has designed a radical new policy package, The Family Credit, that dares to put parents in charge of a budget to spend in raising their children. This initiative, rooted in our belief that parents know best, seeks to give mothers and fathers more support when they most need it – in those first years of a child’s life, when families are more likely to be struggling financially. Investing in children at this stage can overcome the attainment gap that affects too many young lives.
“Our Family Credit is designed to meet the demands of parents with young children, captured in our landmark national poll with Public First.”
Andy Cook, Chief Executive of the CSJ, said:
“For a wealthy industrialised nation, the UK has a dismal record on child poverty. We spend a lot of money but we spend it badly.
“We need to target tax breaks and subsidies on the people who need it most if we are to ease the pressures on the 4 million UK children living in poverty.
“This means concentrating the £13 billion child benefit bill on families with small children who struggle most to pay their bills and give a comfortable and secure home to their kids in those crucial early years.
“Our tax system is among the least family-friendly in the western world. Other countries recognise the extra burdens on parents with children and design their systems so that if a parent wants to stay at home to look after the children, it is financially possible to do so – unlike the UK.
“A fully transferable marriage tax allowance would make a huge difference to the household budgets of many families and expand the choices available to mothers and fathers. Equally, allowing parents to decide how to spend their childcare subsidies – either in formal nurseries or in informal settings supervised by grandparents or friends – would make family life more stable and happier.
“The CSJ will be pressing the next government to implement our proposals to launch a real assault on child poverty.”
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