Starmer urged to tackle child poverty with tax and welfare shake-up

Plans for a radical shake-up of the tax and benefit system aimed at rescuing up to 4 million children mired in poverty have been drawn up by an influential think-tank.

They would boost the income of some low-earning families by as much as £20,000 a year while not costing the taxpayer any extra money.

The ‘family credit’ package has been drawn up by the Centre for Social Justice, the architect of the universal credit welfare reforms of the last government, and will be presented to Sir Keir Starmer’s new administration.

At the heart of the CSJ package is a proposal to target child benefit payments on families with youngsters under the age of five.  Parents with two pre-school children would receive an annual payment of £7,400 a year, with some struggling families getting more than £20,000 per year.

It argues that families are most likely to struggle financially when children are small and in their formative years when help is needed most.

This would cost about £10 billion a year – less than the £13 billion-a-year bill for the current system.

The £3 billion saved should be used to pay for fully transferable personal tax allowances between spouses or partners, which would mean a big boost for the income of families where one parent stays at home to look after the children or works part time and only makes limited use of their tax allowance.

The third part of the package is an expansion of free childcare from 39 weeks to 47 weeks a year, paid to parents in cash rather than vouchers or through tax breaks, the £7 billion cost of which is already allocated in Whitehall budgets.

“This dramatic shift in our childcare system reflects our commitment to supporting children in their most formative early years: evidence shows that investing in children’s early years repays huge dividends in terms of reduced child poverty, reduced need for services, and boosted productivity in the early years,” the CSJ says in its new report, Prose not Poetry: Delivering from Day One.

Ed Davies, Policy Director at the Centre for Social Justice said:

“Labour’s election manifesto said that the new government would put a focus on reducing child poverty at the centre of how we secure opportunity for children and young people from every background and every corner of our country.  All the evidence tells us that can only be achieved in partnership with parents and by doing more to support those formative early years of a child’s life.  The new government has a once-in-a-generation opportunity to build a new partnership with British parents by shaking up our creaking child benefit system to improve our children’s futures, at no cost to the taxpayer.”

The new CSJ report sets out plans on addressing the immediate priorities for the new government.

It calls for an “into work guarantee” to curb the numbers of people of working age – up by nearly a million since the 2020 Covid pandemic – giving up their jobs. The guarantee would protect the many people who say they want to move off benefits into work but are worried that if their new job goes wrong, they may find it hard to claim welfare again.

Other proposals in the report tackle prison over-crowding, knife crime by backing stop and search by police, and measures to help ‘ghost children’ – those who have dropped out of school since the shock of the pandemic – back into the classroom.