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Child benefits in the United Kingdom

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Child benefits in the United Kingdom are a series of welfare payments and tax credits made to parents with children in the UK, a major part of the welfare state.

The child tax allowance

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The first modern child tax credit was introduced in David Lloyd George's 1909 'People's Budget'. This introduced a £10 income tax allowance per child, for tax payers earning under £500 per annum. Following extensive Parliamentary debate, the Budget became law as the Finance Act (1909–1910) 1910 on 29 April 1910.[1] Since the income tax rate was then 1 shilling and two pence in the pound (5.83%), the value of the tax credit was therefore 11 shillings and eight pence per child. Since most people did not earn enough to pay tax, this was a subsidy for middle-class parents. The nominal value of these tax credits were generally, though not always, increased in line with income tax rates. For instance, by 1916, income tax had increased to five shillings in the pound (25%), and the tax credit to £25, giving a value of the tax credit of £6 5 shillings.

Family Allowance

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Calls began for a specific family payment in the early part of the twentieth century. These were successfully opposed by those who saw men, earning higher wages than women, as bread-winners, supporting the family through their wages – family allowance payments were seen as socialist and/or feminist in nature.[2]

Over the 1930s, growing evidence showed that large numbers of children were born into poverty, with 47% suffering five years or more of malnutrition. Higher wages would not effectively target these children, as the majority of male workers had no dependent children. A White Paper of Family Allowances was published in May 1942, giving costings for various levels of family allowance. These were not immediately adopted, and following the publication of the Beveridge Report, which called for subsistence levels of payments, uprated with the cost of living, the Family Allowances Act 1945 was passed. This provide for a five shilling per week payment for each child, after the first. This was designed to support large families, and was set well below the nine shilling a week subsistence level (further devalued by inflation) recommended by Beveridge.[3] In 1952 the rate was increased to eight shillings per week. In 1956 the rate for the third and subsequent children was increased to ten shillings per week, and the maximum age for payments for dependent children was increased from 15 to 18.

In 1968 the rates were increased from 8 to 15 and then 18 shillings and from 10 to 17 shillings and then £1 respectively,[4][5] but this was paid for in part by a reduction in the value of child tax allowance, so that the poor would benefit, but the middle classes did not.[6]

In 1975, the rate was increased to £1.50 (equivalent to 30 shillings) for each child after the first.[7]

Family Income Supplement

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Main article: Family Income Supplement

Family Income Supplement was introduced in 1970 by the new Conservative government of Edward Heath, following a child poverty campaign, effective from August 1971, and provided for a payment to families on low wages. Claimants were required to provide payslips, to prove they were in employment, for a minimum of 24 hours per week. Take-up of the benefit was initially poor, with less than half of those eligible claiming.[8][9]

Rates were raised largely in line with inflation to 1979, but several above-inflation increases followed under the Conservative government of Margaret Thatcher. By November 1984, rates had risen to a maximum £23/week for one child, and an additional maximum of £2/week for each subsequent child, based on a maximum income threshold of £90/week, plus £10/week for each additional child. In addition, the numbers of families in receipt of the benefit, which showed no increase in the number of recipients over the 1970s (in 1972, there were 89,000 in receipt, and in 1980, 88,000), increased sevenfold over the course of the 1979–1997 Conservative governments.

Year Claimants Annual growth rate[10]
1972 89,000 N/A
1980 85,000 0%
1985 199,000 18.5%
1990 300,000 9.8%
1995 600,000 13.6%
1999 780,000 6.8%

The Social Security Act 1986 provided for Family Income Supplement to be replaced with Family Credit, a similar scheme.

Child Benefit and the end of child tax allowance

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The Child Benefit Bill was introduced in 1975 by Barbara Castle, based on the child credit element of the rejected previous Heath government's Tax Credit proposal that would have replaced PAYE, integrating tax and benefits.[9]

Child benefits introduced for the first time a universal payment, paid for each child, doubling the number of children within its scope. Like the family allowance, which it replaced, the new benefit was not means tested; an attempt by the Callaghan government to introduce this was thwarted in 1976 when cabinet papers were leaked to the Child Poverty Action Group.[11]

The rate payable was £1/week for the first and £1.50 for each subsequent child. An addition 50p was payable to lone-parent families. Unlike the family allowance, provision was made for the rate to be uprated, at the Secretary of State's discretion, each year. By the end of 1978 the rate had been increased to £3/week for each child, with an additional £2/week payable to lone-parent families.

In 1979 the Child Tax Allowance was removed, the value of the allowance taken up in higher child benefit payments, now £4/week, plus £2.50/week extra for lone-parent families.

Child benefit rates were uprated roughly in line with inflation until 1988, but subsequently was frozen until 1990, in order to curb welfare spending.[12] A new higher rate of child benefit, payable for the first child only, was introduced in 1991. This was £1 higher than the rate payable for subsequent children, which was again frozen, at £7.25/week. From 1991 Child Benefit increased in line with inflation, until 1998, when the new Labour government increased the first child rate by more than 20%, and abolished the Lone Parent rate.

New Labour oversaw the biggest increase in child benefit in UK history, with over 7.2 million mothers and 12.8 million children benefitting from a 25% rise above inflation. This rise in child benefit directly contributed to the lifting of over 1.8 million children out of poverty.[13]

Rates increased again in line with inflation until 2010, since which time they have been frozen.

Effective from 7 January 2013, Child Benefit, a universal benefit since its introduction, became means tested – those earning more than £50,000 per year would have part of their benefit withdrawn, and if earning over £60,000, would receive nothing at all. The charge was based on individual, not household income, hence a household of two earners each earning £50,000 would receive full child benefit, while a single-earner household earning £60,000 would receive none.[14][15] However, the reduction or elimination for higher-earners does not take the form of a reduced weekly child benefit amount but rather the state is reimbursed by the higher earner via a tax charged on the higher earner (or if in a couple where both parties earn over £50,000 then the person earning the higher amount) in the amount that they were overpaid over the course of the previous year.[16] Couples can choose to "opt out" of child benefit if they estimate that this would be easier than paying back the overpaid amount each year.[17] In the summer of 2023 it was announced that a new way of paying the charge would be available via their PAYE tax code, though this isn't possible yet and a date for rollout has not been announced. [18]

Current rates

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The following are the rates that apply as of 27 February 2024.[19]

Who the allowance is for Weekly rate
Eldest or only child £24
Additional children £15.90 (per child)

See also

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References

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  1. ^ "Finance (1909–10) Act 1910". legislation.gov.uk. Retrieved 2014-01-11.
  2. ^ Family, Dependence, and the Origins of the Welfare State: Britain and France – Susan Pedersen
  3. ^ "The Cabinet Papers – The Beveridge Report and child benefit". nationalarchives.gov.uk. Retrieved 2014-01-11.
  4. ^ "Family Allowances and National Insurance Act 1967". legislation.gov.uk. Retrieved 2014-01-11.
  5. ^ The Committee Office, House of Commons (3 March 1999). "House of Commons – Social Security – Report". publications.parliament.uk. Retrieved 2014-01-11.
  6. ^ "Family Allowances: 15 Jul 1968: House of Commons debates – TheyWorkForYou". theyworkforyou.com. Retrieved 2014-01-11.
  7. ^ "Social Security Benefits Act 1975". legislation.gov.uk. Retrieved 2014-01-11.
  8. ^ Documents on Health and Social Services: 1834 to the Present Day – Brian Watkin
  9. ^ a b Sloman, Peter (1 June 2016). "'The Pragmatist's Solution to Poverty': The Heath Government's Tax Credit Scheme and the Politics of Social Policy in the 1970s" (PDF). Twentieth Century British History. 27 (2). doi:10.1093/tcbh/hwv042. Retrieved 21 August 2018.
  10. ^ "ff/taxcredits". ifs.org.uk. Retrieved 2014-01-11.
  11. ^ "Late Labour MP Malcolm Wicks admits child benefit leak". BBC. 20 January 2014. Retrieved 2014-01-20.
  12. ^ "Child Benefit" (PDF). Revenuebenefits.org.uk. Retrieved 2013-02-23.
  13. ^ "Nigel has written a key list" (PDF). Paultruswell.org.uk. Archived from the original (PDF) on 23 October 2006. Retrieved 23 July 2015.
  14. ^ "HM Revenue & Customs: The High Income Child Benefit charge – the basics". hmrc.gov.uk. Retrieved 2014-01-11.
  15. ^ "Child benefit cap is tough but fair - FT.com". ft.com. Retrieved 2014-01-11.
  16. ^ "High Income Child Benefit Tax Charge". GOV.UK. Retrieved 2019-12-16.
  17. ^ "High Income Child Benefit Tax Charge". GOV.UK. Retrieved 2019-12-16.
  18. ^ "New PAYE process for High Income Child Benefit Charge". bgm.co.uk. Retrieved 2024-02-27.
  19. ^ Gov.uk (last updated 27 Feb 2024). Child Benefit rates. Retrieved 27 Feb 2024.
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