James Somerville-Meikle: Sunak should make supporting families a priority in his Budget

25 Feb

James Somerville-Meikle is Head of Public Affairs at the Catholic Union.

The economic cost of this pandemic is all too clear for many. But personal finances and household budgets are not the only things feeling the strain.

For some people, this past year has pushed relationships to their limits – with more time spent at home, greater stresses and anxieties, and an emotional cost impossible to calculate.

Among the alarming reports and grim statistics of the past year, the increase in people seeking divorce guidance from Citizens Advice and law firms reporting an increase in divorce applications should be some of the most worrying signs of the long-term impact of this virus.

As the Chancellor prepares to deliver his Budget next month, the state of people’s marriages might not be foremost on his mind, but there are good reasons why Rishi Sunak should make supporting families a priority.

In 2016, the Relationships Foundation estimated that the cost of family breakdown to the taxpayer – the various extra costs of supporting single parents and managing the fallout from relationship breakdown – was £48 billion. A figure that is sadly likely to be even higher in the wake of the pandemic.

While money alone cannot and should not be enough to keep a marriage together, a greater focus on how the tax and benefit system can support families is long overdue and is needed now more than ever.

Government spending has tended to focus on picking up the pieces from relationship breakdown, rather than supporting the family unit in the first place. If the Chancellor wants to avoid spiralling welfare spending as a legacy of the pandemic, then the Treasury needs to look more closely at the tax burden faced by families not just individuals.

One of the most pressing questions facing the Chancellor is the future of the £20 per week uplift to Universal Credit and tax credits. The policy has helped millions through the pandemic, but it has cost billions – £6.1 billion according to the Office for Budget Responsibility.

The temporary change has meant that someone on the basic rate of Universal Credit over the past year has received an extra £1,040 than they would have done without the uplift (an increase of 29 per cent on the pre-pandemic rate).

It’s a testament to the extraordinary times we live in that this hike in payments barely made the news when it was announced in March last year, but it is certainly making headlines now that the end of the year-long extension is in sight.

In some ways perhaps this was inevitable. Once something is given – no matter how temporary – it is hard to take away. People who have felt the benefit of the higher rate of payments will also feel the loss if and when they come to an end.

The challenge facing the Chancellor is how to avoid one of the biggest and most generous changes to social security in our history ending up looking like daylight robbery.

The £20 uplift has undoubtedly helped to get more money to some of the people most in need during the pandemic. But the problem with making changes to the basic rate of Universal Credit and tax credits is that everyone is treated the same, regardless of who they are or their circumstances. A working mum with three children gets the same benefit from an extra £20 a week through tax credits as a single man with no children.

If the Chancellor is looking for a way to rebalance welfare spending in the wake of the pandemic, then a more targeted approach, focusing on support for families and those with childcare responsibilities seems like an obvious solution. It would also be a big step towards delivering the manifesto commitment of making Britain the greatest place in the world to start a family.

There are oven-ready policies that the Chancellor could introduce in his Budget that would help families, and arguably be a greater help to children in the long term than the £20 uplift.

Perhaps the most obvious option would be to scrap the two-child cap on the childcare element of Universal Credit and tax credits. The policy was introduced in the Budget in 2015 and meant that from April 2017, support provided to families through Universal Credit or tax credits would be limited to the first two children.

The Child Poverty Action Group estimated in April 2020 that 230,000 families had been affected by the policy, and that an additional 60,000 families could be affected as a result of the pandemic. The policy has been roundly criticised by faith groups, including the Catholic Church, The Muslim Council of Britain, and Board of Deputies of British Jews, on account of its discriminatory approach to larger families.

The justification for the policy was that parents claiming Universal Credit or tax credits should face the same choices about the number of children they can afford as those supporting themselves solely through work. But the economic crisis caused by the pandemic has shown how quickly families can fall into difficulty. Even in normal times, no parent can be sure that their financial security will withstand unpredictable events such as illness, death, or redundancy.

Another possible source of inspiration for the Chancellor could be moving towards fully transferable personal allowances. Currently, 10 per cent of the current personal allowance of £12,500 is transferable between couples. Going further and making personal allowances fully transferable would remove the tax penalty suffered by single earner couples and help families keep more of the money they earn.

A fully transferable personal allowance would not be cheap. David Goodhart estimated in 2016 that the cost to the Treasury would be in the region of £5 billion – a significant amount of money, but still less expensive than the £6 billion cost of maintaining the uplift in Universal Credit and tax credits.

The Chancellor could also look at increasing child benefit, which has been largely frozen since 2010. The Child Poverty Action Group has estimated that increasing child benefit by just £10 per week would reduce child poverty by 450,000 as well as helping to stimulate the economy to recover from the pandemic.

There are options available to the Chancellor for this Budget and the rest of this Parliament to create a tax and benefit system that finally supports the family unit. The pandemic has shown the importance of having strong families alongside a social security system for those who need it.

Helping families keep more of the money they earn will not solve all of their problems, but it would certainly help. Let’s use this moment to build back better for families.

Neil O’Brien: Why closing the marriage gap between rich and poor is a vital mission for social justice

27 Jul

Neil O’Brien is MP for Harborough.

Our daughter just had her last day at nursery. In the autumn she’s off to school. We’re sponging second-hand uniform from friends. It feels like just the other day I was driving home after her birth, flakes of snow streaking through the headlights.

Our baby son can suddenly crawl fast. He wants to climb the stairs, and chew any bits of cardboard he finds lying around.

My sister has unearthed a trove of old black and white family photos. There’s lots of things that catch the eye: Glasgow’s housing estates looking shiny and newly-built; the funny looking cars; the endless cigarettes. The bigger families too: my gran with her two children from before the war, and two after.

It set me thinking about family. Ten years ago we talked about it a lot. David Cameron’s criticism of “Broken Britain” highlighted work by the Centre for Social Justice on family breakdown and poverty. The most eye-catching pledge during his leadership campaign was a marriage tax break.

Over the last five years there’s been a lot of other things doing on, to say the least.  But as the new government starts to set out its domestic agenda, family should be part of it.

Politicians are nervous talking about family. It’s not just bad memories of the 1990s, when we screwed up and sounded like moralising hypocrites against a backdrop of sleaze.

It’s a deeper fear of sounding critical of friends and relations. We all have close friends who have been through everything: raising kids alone, divorce, abortion, bereavement and so on. I think of a friend who has raised two wonderful kids alone. Another single friend helped look after a young person when no-one else would. I don’t know how anyone manages to do it single-handed: they’re amazing people.

Some worry family policy will be about condemning them, or that politicians want to try and trap unhappy couples together. It mustn’t be about either. Instead, it has to be about two different things.

First, helping people with children financially, and with practical help, particularly during the difficult years with small children. Having no money on top of no sleep and endlessly crying babies makes it harder to sustain relationships.

Second, it should be about support and building up the social capital that many middle class people in politics take for granted. Indeed, it’s about healing a split in our society.

Let me explain.

Politicians who are serious about reducing poverty and spreading opportunity can’t avoid thinking about families and households.  Last year 23 per cent of children in couple households were below the fixed poverty line, after housing costs, compared to 38 per cent of children in lone parent households.

Controlling for other factors, A CSJ report found those who experience family breakdown when aged 18 or younger are twice as likely be in trouble with the police or spend time in prison, and almost twice as likely to underachieve educationally. They’re more likely to suffer mental health issues.

One part of family policy should be direct help families with children. I’d love to see us recognise children in the tax system, as we did until the 1970s: our tax system is unusually family-unfriendly. We should help working families with children on Universal Credit keep more what they earn before it gets tapered away. The CSJ has called for higher child benefit for parents of young children.

But we need to go deeper, and recognise that the links between family breakdown and low income run in both directions. Over recent decades a quiet revolution has taken place, and richer and poorer people now live in very different family structures.

Between 1979 and 2000, the proportion of households with dependent children which were lone parent households grew from 11 per cent to 25 per cent, then remained at that level, dipping a bit in recent years to 22 per cent in 2019. Since 1979, the proportion which are married couples fell from 89 per cent to 61 per cent.

There are few countries in Europe where children are less likely to live with both parents than Britain. It’s more likely that a teenager sitting their GCSEs will own a smartphone (about 95 per cent) than live with both parents (58 per cent).

But these headline stats conceal a massive social split, which starts at the point of birth and widens out.

For those in the top socioeconomic group, 75 per cent of children are born to parents who are married; another 22 per cent are jointly registered to parents cohabiting; 2 per cent are jointly registered to parents living apart, and just 1 per cent registered by one parent only.

At the bottom end of the scale, 35 per cent are born to married parents, 38 per cent to cohabiting parents, 21 per cent jointly to parents living apart and 6 per cent registered by just one parent.

These huge differences weren’t always there. For people at the top, family life looks similar to their parents’ generation. For people on lower incomes, society looks utterly different. A marriage gap has opened up, and society has been splitting apart into different family structures for rich and poor.

In the 1970s, mothers of pre-school children were equally likely to be married whether they had a degree or not, and 90 per cent plus were. By 2006 for mothers with a degree that was down to 86 per cent, but for non-graduate mothers it fell to 52 per cent.

Between 1988 and 2018 the proportion of jointly registered births which were to married parents fell from 90 per cent to about 77 per cent for the top socio-economic group. At the other end of the scale it fell from 70 per cent to 37 per cent.

Equally, it’s impossible to understand modern Britain without appreciating the different families people from different ethnic groups live in.

In 2011, among households with dependent children, for white households 53 per cent were married couples, 16 per cent cohabiting couples, 25 per cent lone parents, and 7 per cent other household types (mainly multigenerational households).

Among Indian households with dependent children, far more were married couples or multigenerational households.  68 per cent were married couples, 2 per cent cohabiting couples, 9 per cent lone parents and 21 per cent in multigenerational households.

Among black Caribbean households 28 per cent were married couples, 11 per cent cohabiting couples, 47 per cent were lone parents and 14 per cent in multigenerational households.

People of different ethnicities live in very different families, which influences everything else.

Most voters favour government taking action to support family life. But in Whitehall there’s scepticism: can the state do anything about these trends?

The truth is we don’t really know. As it happens, at the point when government stopped publishing its measure of family stability in 2016, the trend seemed to be moving back a little towards more children living with both parents.

Whitehall can be too pessimistic. Until Michael Howard, the consensus was that nothing could be done about rising crime. He proved the consensus wrong. Likewise, in the 1990s Whitehall had given up on helping lone parents into work. But successive reforms (under governments of all parties) doubled their rate of employment.

It’s not like there’s no ideas about how to help.  There’s masses and masses of recommendations gathering dust on think tank shelves, covering everything: tax, benefits, family hubs, relationship education in schools, birth registration, pre-and postnatal support…

My modest proposal is this: let’s do a major programme of controlled trials to test these ideas, and see what, if anything, makes a difference. Happily for the Treasury, experiments are cheaper than rolling things out nationally.

But we have to try. The costs are too high not to. They say the best time to plant a tree is 20 years ago, but the second best time is today. Let’s plant some seeds.