The level of public subsidy to households with children has doubled since 1997, and now stands at £22bn a year, but the price of parenthood is too high for many ordinary families, according to a report published today by the Centre for Policy Studies.
Jill Kirby’s ‘The Price of Parenthood’ concludes that the “financial penalties” on couples who bring up children together have been growing at the same time as the birth rate has fallen.
The proportion of children growing up with one parent has risen by more than 25% in the seven years since Labour came to power, the CPS said.
This was “hardly surprising” since “in effect family break-up is heavily subsidised by the state.”
It added: “For example, a two-parent, one-earner family on average income (£24,000), with a mortgage and two young children (‘Mr and Mrs Average’), is just over a pound a week per head better off than a lone-parent household entirely dependent on welfare.
“If Mr and Mrs Average split up, their weekly income after tax and housing costs increases by 35% from £223 to £301 (if the husband pays child maintenance); or by 65% to £369 if he evades it [according to one case study].”
Family break-up has a significant impact on the Treasury, the CPS said.
“The cost to the taxpayer if Mr and Mrs Average separate is between £8,450 and £12,000 a year. Today, a lone-parent household raising two children on welfare costs the public purse more than £11,000 a year in benefits alone.”
Robert Rowthorn, professor of economics at the University of Cambridge, said in a foreword to the report: “The present system feeds on itself – the more money is spent on subsidising lone parents, the greater incentive there is for couples to break up.”
He claimed that Britain would soon be the “lone parent capital of the world.”
Kirby’s report showed how “present policies penalise intact families and subsidise lone parenthood on a scale that is not widely appreciated,” he said.
The report found that lone parents receive average tax credit and benefit payments five times larger than couple households.
It concluded: “In order to rebuild family life and cut welfare dependency, Britain must learn some of the lessons of US welfare reform. The bias against two-parent families must be removed and a transparent system of genuine tax allowances introduced to replace the complex, expensive and unfair tax credit system.
“Welfare support should be limited to short-term relief of hardship. When assessing a family’s needs, both parents should be involved in that assessment, regardless of whether they are living together or not.”
‘Selective and misleading’
The Treasury responded that the income quoted for “Mr and Mrs Average” was lower than the actual average for two-parent families, and appeared to have been set deliberately at the exact cut-off point for a tax credit, according to a report in the Guardian.
Their mortgage, as a proportion of their income, was also far above the average – inflating their estimated mortgage payments by as much as £65 a week, a spokesman said.
“This analysis by Ruth Lea’s lobby group is predictably selective and misleading. It is simply nonsense that the government encourages people to remain on welfare. In reality, we have created 2m new jobs since 1997, and as a result of the new support we have put in place, the number of lone parents in employment has increased by 40% since 1997,” he added.
Kate Green, chief executive of the Child Poverty Action Group, said: “Just over half of the children living in lone parents families live in income poverty in Britain today compared to a fifth of the children living in couple families.
“The implication of this report, that the benefits and tax credit system ought to specifically favour couples with children, would increase child poverty and hit the poorest children hardest. We welcome any system where the needs of the poorest children are put first and this should continue.”
Andrew Goodall
editor@taxzone.co.uk
