HC Deb 26 October 1976 vol 918 cc112-4W
28. Mr. Wakeham

asked the Secretary of State for Social Services whether a tax-free child benefit will reduce the effect of the poverty trap.

Mr. Orme

I regret that I cannot make a reliable estimate until the relevant details of the means-tested benefits, and of the tax arrangements, which will operate from April 1977, are known.

35. Mr. Kenneth Clarke

asked the Secretary of State for Social Services whether he will make a statement on the introduction of child benefit.

Mr. Ennals

I made the following statement on 23rd SeptemberThe Government today decided to phase in the full child benefit scheme by 1979. We have accepted the recommendation of the joint Labour Party/TUC Working Party that the full child benefit scheme should be phased in over the next three years. Introducing the scheme in stages gets over the original snag—the sudden drop in take home pay during a period when pay restraint is linked with tax concessions. There was widespread recognition of the fact that an all-at-once transfer from the father's wallet to the mother's purse might undermine acceptance of the voluntary pay policy. That is why Stan Orme, the Minister for Social Security, and Joel Barnett, Chief Secretary to the Treasury, entered into discussions with the TUC and the Labour Party to find a way of bringing about this major social reform without risk to the pay policy. The three year phase-in does exactly that. There can now be no possible room for doubt about the Government's determination to introduce the full child benefit scheme at the earliest possible moment. I know that our decision will be warmly welcomed not only by seven million mothers but by all those who have for so long been campaigning for effective family support. Over the three years starting April 1977 the child tax allowance for children under 11 will be withdrawn, and allowances for older children correspondingly reduced. The money will be transferred to tax free child benefit paid to mothers. This will bring about the transfer of support for children from fathers to mothers, who do the housekeeping. It will also give the full benefit of the value of tax allowances to families too poor to pay tax. The immediate effect will be that child benefit, which will replace family allowances next April, will be tax free. Child tax allowances for 1977–78 will be reduced by the value of the tax and clawback which would otherwise have been levied on the benefit. This arrangement means that take home pay will fall only 70p, exactly the same amount as under the Government's earlier proposals. The benefit will be paid at the same level as earlier proposed—£1 for the first child and £1.50, as family allowances now, for the others. No extra expenditure is therefore involved. But the vital first step, establishing the structure of a tax free benefit and phasing out child tax allowances, will have been taken. Also, as I promised in the House of Commons, in April 1977 we will be modifying the Family Income Supplement scheme to eliminate losses of FIS following the introduction of Child Benefit. In the following year, 1978, CTAs will be reduced again and in 1979 the under 11 CTA will go entirely. Exactly how the withdrawal is staged between those two years will be decided later. But whole of the amount of the reduction will be added to the child benefit paid to the mother. Whether it will be possible as recommended by the TUC and Labour Party members of the Working Party to put any extra resources over and above this to raise the level of family support will have to be decided later in the light of economic and other conditions at the time. The phasing out of child tax allowances will apply generally, whether or not the family is receiving child benefit. This will include the parents of students. But adjustments will be made in the parental contribution scales for student grants to take account of the loss of CTAs. Child tax allowances will, however, be retained in full in 1977/78 for the parents of non-resident children. The longer term arrangements for these parents will be decided later. No legislation is required on child benefit itself since the Child Benefit Act was passed last year and regulations fixing the rate and the starting date were made this summer. Legislation will be introduced in next year's Finance Bill to exempt child benefit from tax and clawback and to reduce child tax allowance for 1977/78. The Inland Revenue will take account of these proposed changes in revising PAYE code numbers this winter for 1977/76 and this will be the subject of a later statement. We have already started our publicity campaign inviting families with only one child, and who therefore do not get family allowance, to claim the new benefit. It is particularly important that they do so now that CTAs are going to be reduced next April. Those who have a child 13 or over should claim now; for children aged 8–12 claims should be made in October, for those 2–8 in November and under 2s in December. Families already getting family allowance do not need to claim: most will get the new benefit automatically and the rest will have their books overstamped in February.

44. Mr. Peter Mills

asked the Secretary of State for Social Services whether an amendment will be sent out with the leaflets on child benefit.

Mr. Orme

An amending leaflet to explain the changes in the child benefit scheme that was announced on 23rd September is being prepared for use with the child benefit leaflet "claiming for one child" at present available at post offices. This new leaflet will replace the information slip now on display in post offices.

Mr. Ashley

asked the Secretary of State for Social Services what would be the net cost of raising the additional payment for children in one-parent families under the child benefit scheme by: (a) 50p per week, (b) £1 per week and (c) £2 per week; and how many families he would expect would get the full benefit of such increases assuming no change in the regulators for sickness benefit, family income supplement, and other means-tested benefits.

Mr. Orme

The estimated net cost of raising the 50p per week additional payment of child benefit for one-parent families is as follows:

(a) by 50p per week £6 million
(b) by £1 per week £12 million
(c) by £2 per week £24 million

I regret that the available information does not permit a precise answer to the second part of the Question, but in the circumstances envisaged by my hon. Friend only a minority of one-parent families would gain the full benefit.