Briefing for House of Commons Standing Committee on Child support, Pensions and Social Security Bill

The impact on children in second families
January 2000

The measures contained in the Child Support, Pensions and Social Security Bill are directed to providing a simpler, more efficient scheme that is of actual benefit to the poorest children. Child Poverty Action Group (CPAG) therefore gives overall support to the new scheme. We have some concerns which we believe can be addressed without undermining the principles of the new scheme. This briefing concentrates on the impact on low-income second families. Please contact us if you would like a copy of our more general briefing.

1. Second families on income support/income-based JSA
2. Second families in low-paid work

Average assessments fall under the new scheme, so most non-resident parents will not be worse off. However, of the 150,000 non-resident parents who will have their assessments increased or will lose their exemption from paying child support, about 70% are on benefit or have net incomes of less than £200 a week. Only 22% of non-resident parents have re-partnered. But with such a significant proportion on low incomes, it is right to consider the position of the children in such families in the context of the overall aim of tackling child poverty.

There are measures in the Bill to protect low-income second families (earning below £200). For many, these will be adequate. However, we remain concerned at the prospects for those who are already in financial difficulty, or whose circumstances are such that they are left with less disposable income than in most other second families.

In particular, we are concerned that:

1. Second families on income support/income-based jobseekers allowance will have £5 deducted from their benefit for payment of maintenance.
2. Some low-income second families in work may be experience hardship, in particular those with high housing costs.

1. Second families on income support/income-based JSA

The current situation

Currently, a non-resident parent is exempt from payment of maintenance if he is assessed as liable for the minimum payment of maintenance (currently £5.20) and he is:

• responsible for a child living with him;
• a prisoner;
• entitled to a benefit such as an incapacity, disability or maternity benefit;
• under 16; or
• has income of less than £5.20 a week (this would include people such as youth trainees and students whose income is ignored.

The Child Support, Pensions and Social Security Bill

Under the Bill, it is proposed that only the following groups will be liable for a ‘nil rate’ (Schedule 1, paragraph 5) of maintenance:

• full time students in advanced education;
• prisoners;
• non-resident parents on income support/income-based jobseekers allowance who have shared care of the qualifying child for at least 57 nights a year.

Other non-resident parents on income support/income-based JSA will be liable to pay the £5 a week minimum. This includes those responsible for children in a second family (who are currently exempt). The result is that 44,440 second families will see their income support/income-based jobseekers allowance reduced by £5 a week.

We understand that the Government wishes to encourage compliance and to ensure that as many children as possible receive maintenance. However, income support/income-based jobseekers allowance fall significantly short of the levels of income required to meet the needs of families. Deducting a further £5 will cause significant hardship. These second families will as a matter of public policy be required to live below income support level. CPAG therefore urges the Government to include a £5 premium for payment of maintenance as part of their benefit. A deduction can then be made for payment of maintenance without pushing them further into poverty. This would reinforce the Government’s commitment to ending child poverty.

2. Second families in low-paid work

The following examples illustrate the potential problem for second families with high housing costs.

Example

A non-resident parent is liable for maintenance for one child from his first marriage. He has remarried and is now responsible for two children aged under 11 from this second marriage. He is working full-time and claiming tax credits. He pays average rent (£63.30 a week) and average council tax (£9.70 a week):

Payment of child support, rent and council tax leaves the family £10 above income support level. Higher than average rent, travel to work costs or existing debts could easily bring them below this level. While CPAG agrees that maintenance should be a priority for non-resident parents, we are anxious that hardship is not caused to children in a second family as a result of maintenance payments.

CPAG therefore recommends the Government consider increasing the housing benefit disregards as part of the housing benefit review. One option would be to calculate entitlement to housing benefit on the basis of income after maintenance has been paid. In the above example, the result would be an increase in the family’s housing benefit entitlement of £16.25 a week, leaving them £26.25 above income support level. This helps ensure the family can pay their rent and meet other expenses. The Government has estimated the cost of this measure to be £30 million a year.

Increasing housing benefit disregards would not help homeowners, for whom a different solution should be sought. Concerns about high travel to work costs could be met through widening the appeals system or in a variation to the scheme (clause 5).

We understand that the Government has set up a programme of systematic research to ‘evaluate the impact of the reforms on CSA clients and their families will collect information about children’s welfare, payment levels and compliance. This data will enable us to observe the effect of the reforms on the well-being of second families.’ CPAG welcomes this and hopes it will provide useful information to evaluate the impact of the new system on families.

In the mean-time, however, we believe there is sufficient information available (for example, by comparing the levels of income people have in work and on income support) to allow the Government to consider possible solutions for second families with high housing costs as part of the housing benefit review.