Page last updated at 12:46 GMT, Tuesday, 3 March 2009

Tax credit 'led to more divorces'

By Martin Shankleman
Employment correspondent, BBC News

Pay packet
Single mothers benefited from the tax credit scheme, it is alleged

The Working Families Tax Credit, has led to more divorces in poor households, according to new research.

Professor Marco Francesconi, from Essex University, says the divorce rate more than doubled in some categories in Britain between 1999 and 2003.

This applies to women claimants living with men who either do not work or work less than 15 hours a week, he says.

Prof Francesconi says the move could be linked to extra child care support that single mothers get under the scheme.

He says the credit, which was one of Gordon Brown's flagship policies, may have an "unintended consequence" of encouraging women in poor households to divorce their husbands.

Both husband and wife had to work at least 16 hours a week in order to receive the child care benefit of the Working Families Tax Credit.

However, Prof Francesconi says that if a women is single, she will be entitled to the extra cash for child care.

"It could be around 30, 40 per week extra which the claimant will receive, so at the margin, when you are talking about poor households, you're talking about significant amounts of money," he said.

'Bigger benefit'

Such women, he said, had an outside option, which would change their circumstances, of becoming a single mother.

"In this case, I get an even bigger benefit from the state, because I can receive the tax credit and the childcare component of it and I don't have to care for a husband who's not contributing to the welfare of the family."

Writing in the Economic Journal, Prof Francesconi and his colleagues say the divorce rate for this group of families has jumped from 2% to 4.4%, an increase of 160%.

The researchers, who analysed information from the British Household Panel Survey, found there was no comparable jump in the divorce rate amongst other women claiming the credit.

The Working Families Tax Credit (WFTC) was introduced by the Labour government in 1999, which said it would help 1.5 million families by providing a "decent, living wage along with generous help with childcare costs" .

Gordon Brown, who was chancellor at the time, said his aim was to abolish family poverty for every family on WFTC and ensure that every child had the best start in life.

Prof Francesconi says his findings should not detract from the overall achievements of the tax credit scheme, which had been "extremely successful" in getting unemployed people, particularly single mothers, back to work.

A government spokesman dismissed the findings, saying: "Academic studies have found no consistent connection between the structure of the tax system and people's personal choices about marriage and children."

He said the WFTC was replaced in 2003 by a different scheme.

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