HC Deb 03 March 1981 vol 1000 c81W
43. Mr. Rooker

asked the Secretary of State for Social Services if he will make a statement outlining the way by which child benefit affects the poverty trap.

Mrs. Chalker

The so-called poverty trap is the situation in which a working family would find that, as a result of an increase in earnings,

  1. (i) Their PAYE income tax and social security contributions would be higher; and
  2. (ii) some means-tested benefits, in particular their housing benefits, would be liable to reduction.

As the hon. Member knows, child benefit does not depend on the level of the family's earnings. It is tax-free. It is not subject to a means test. Thus there is no direct relationship between child benefit and the poverty trap.

Child benefit is, however, included in calculating the family's gross income for housing benefits purposes. It is not taken into account in assessing the family's entitlement to family income supplement—FIS. In any event, an award of FIS lasts for 12 months and is not affected by an increase in earnings during its currency. This mitigates the effects of the poverty trap.