What is child benefit for? A few years ago this innocent question was easy to answer: child benefit was there to help all families with some of the additional costs of children.
How times change. Over the course of this parliament, the government has made two assaults on child benefit. Notoriously, in April 2013 it restricted child benefit by tapering it away from higher earning families, leaving the UK one of only two outlier countries in the OECD with no universal benefit for children at all.
More rarely remarked upon, however, is the fact that child benefit’s real value has been steadily eroded over the last four years. A series of freezes and under-inflation increases has resulted in the benefit losing close to 15 per cent of its worth in one parliament. As the price of essentials such as food and energy, education and transport have all sky-rocketed, the money in parents’ pockets has diminished at an equally alarming rate.
With cuts to child benefit, the government appears to have set a nasty precedent. The think tank IPPR published its Condition of Britain report today, a widely trailed recommendation will be to freeze child benefit up to 2020 to pay for extended childcare for under-fives. This would generate a lot of useful money to be sure, and for a good cause too. But it fundamentally misses the point of child benefit: that it directly supports parents with all kinds of costs associated with children, with clear poverty reduction effects to boot.
That’s not to say that parents might not choose to spend their child benefit on childcare: we know that many do. But research shows that while childcare can absorb a large part of a family’s budget (up to 40 per cent in some cases), other types of costs remain more significant. Raiding child benefit to fund additional childcare provision is giving with one hand while taking away with another. Even more damagingly, it reinforces the idea that child benefit is the go-to pot for any intervention that falls under the rubric of family policy.
This exercise in arbitrage may be completely fruitless: in truth, undermining family incomes is likely to damp down the positive effects on children of extra early-years provision. Switching funds from cash transfers like child benefit, to services such as childcare, may be the policy approach of the day. But cross-national analysis shows it is the total amount spent on families – cash benefits plus services plus tax breaks – that is most closely associated with enduring improvements in child wellbeing.
There’s a reason why child benefit is popular: it does its job and does it well. It benefits children every week whether their parents work or not, providing a simple, reliable income platform for families of all shapes and sizes. Public funds may be tight, but it’s a dismal day when even progressives argue that we should trade off one such essential form of support for families, in order to fund another.
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