A responsible approach?

Today sees the publication of a National Audit Office report into Universal Credit. Many of the morning’s newspapers are carrying this story and, earlier this week, the Telegraph featured an interview with Howard Shiplee, the Director-General for Universal Credit in which he acknowledged there had been a number of ‘missteps’ alog the way. This contrasts with earlier public statements by the likes of Iain Duncan Smith and David Cameron who have previously failed to acknowledge any difficulties. The Prime Minister, in November last year, apparently told Parliament that ‘Universal Credit is on time and on budget’.

There is already lots of media coverage around this issue so I’ll try not to repeat much of it, but a couple of lines in an article in The Guardian yesterday caught my attention. Here they are:

The DWP said it was misleading to characterise money already spent as having gone to waste. “No one has said we’re starting again … we’re looking at enhancing not replacing [systems],” it said.

It said it did not recognise the £350m figure being lost in savings due to the slower roll out of the programme.

A DWP spokesperson later added: “The early roll-out of Universal Credit is allowing us to develop the new benefit in a safe and controlled way. This is the responsible approach.

I thought this was really interesting because the current government have always been very quick to dismiss the child poverty approach of the previous government as a waste of money. Look at the following quotes from the foreword,(written by Iain Duncan Smith) to the government’s Child Poverty Strategy:

Good intentions failed to translate into effective policies.

By transferring cash to make good on short-term relative income effects they entrenched benefit dependency, delivering both poor outcomes for society and a poor return for the taxpayer

Limited social returns were delivered despite significant income transfers

With a focus on fairness and personal responsibility, not cash handouts, this is the responsible choice in this fiscal climate.

we believe that the aims of the Child Poverty Act – to dramatically reduce levels of child poverty in the UK – will not be achieved through simply throwing money at the perceived symptoms. This approach has been exhausted, not only failing to turn the tide on income poverty, but worse still, exacerbating the problem by suppressing incentives to work and keeping families in cycles of entrenched deprivation.

It is now more important than ever to secure optimum returns on investment spending.

Just to put things into a bit of context, the last government missed their own target of cutting child poverty by half by 2010-11. However, during their term of office they still managed to reduce the number of children living in poverty by around 1 million, which, as a taxpayer, I would like to suggest was not a ‘poor return’ and nor do I believe that the last government ‘simply threw money’ at the problem. The current government, on the other hand, are likely to preside over an increase in the numbers of children living in poverty to 2015-16, the term of this parliament, of around 300,000, and it is predicted that the ‘direct impact of the current government’s announced reforms to personal tax and benefit policy will be to increase relative poverty among children by 200,000’

The point I’m trying to emphasise is that, when it suits them, this government (perhaps all politicians) are more than happy to characterise something that was making (slower than expected) progress as an ‘exhausted’ approach that failed and actually made things worse. But, when the shoe is on the other foot and something stands accused of not making planned progress, it is characterised as developing in a ‘safe and controlled way’ and the ‘responsible approach’ is to stick with it. In fact, the Press Release of the report by the NAO contains a section which, whilst focusing on Universal Credit, could easily be taken to represent the current approach to tackling poverty

The Department took risks to try to meet the short timescale and used a new project management approach which it had never before used on a programme of this size and complexity. It was unable to explain how it originally decided on its ambitious plans or evaluated their feasibility.

But then, belief, not evidence, is what it’s all about……

Best wishes,

Steve

CPAG Guest Post: Save Child Benefit

For over 100 years the British tax and benefit system has recognised the costs of raising children. Families with children, whatever their income, have higher costs than families who do not have children. Since 1977, these costs have been recognised in the tax and benefit system through universal Child Benefit (CB) payments. However this is set to change in 2013, when Child Benefit will be taxed back from families with a higher rate tax payer. While the announcements in the budget – which were widely tipped to fix the problem – were a step in the right direction, they by no means fixed the problem. In fact, they missed the point entirely.

When Child benefit payments stop being universal next year, the UK will join Italy as only the second developed country that does not recognise the costs of children in the tax and benefit system. Families with children have higher costs than those without children – regardless of the household earnings. The question of fairness should not be if a household earning £50,000 needs CB or not, it should be a question of fairness between households earning £50,000 who cover the costs of raising happy, healthy children, and those earning £50,000 who do not.

When the claw-back was announced as a back of an envelope idea at the 2010 Conservative Party Conference, George Osborne declared that any household with a higher rate tax payer would lose CB. Without any clear vision of how this might work, it was suggested that all higher tax rate payers would have the entire value of their household’s CB added to their tax bill at the end of the year. Instead, under the announcements made in the budget, families with one earner taking home over £50,000pa will have 1% of their CB taxed back for every £100 they earn. Rather than being thrown down a cliff edge, families are being pushed down a flight of steps; the tax and benefit system will still cease recognising the costs of raising children.

Children are not a private luxury, and while it might sound clichéd, they quite literally are the future of our society. Child benefit plays a crucial role, it is the means through which society contributes to a small part of the costs of raising the next generation.

On top of this unfair claw-back, CB rates have been frozen for three years, which will see their value decline by over 10 percent in real terms. This cut will hit all families, including those with incomes too low to pay tax in the first place.

The Child Poverty Action Group researched what these two changes will mean to families across the income scale. We surveyed over 350 parents who spoke about dreading these changes, and having to cut back on necessities, like food and fuel, as well as missing out on important treats, like buying birthday presents or going camping. Some parents had already planned strategies on how to stretch family budgets even further, such as going without childcare or seeing relatives, but too many simply did not know how they were going to cut back. Parents felt that payments made for children, and spent on children, were being cut to deal with the deficit. No parent thought their child should pay for the financial crisis.

But importantly, the report (accessible by clicking here or on the image above) also highlighted how crucial Child Benefit payments were for family incomes, right across the income scale. We polled 650 parents and found that CB was spent overwhelmingly on meeting children’s needs (on items such as children’s clothing) or on household needs (like bills and mortgages). As Child benefit payments shrink or are taken away in 100 tiny cuts, so too will families ability to meet these needs.

Child Benefit needs to remain universal, to recognise costs of raising children that all families with children bear. Removing it from some families in tiny cuts to pay for the deficit is faulty logic. All wealthy households, including and especially those without children, should pay their fair share – this is done through progressive taxation, not a tax on Child Benefit. Child Benefit rates also need to be restored in line with inflation. With many families finding it harder to provide for their children, it makes no sense to cut payments that are spent on children.

Rys Farthing

Child Poverty Action Group

CPAG is the leading charity campaigning for the abolition of child poverty in the UK and for a better deal for low-income families and children.

Visit the CPAG website here