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EDITIONS
Budget 2001 Thursday, 8 March, 2001, 06:31 GMT
Families under the Budget
Both Labour and the Tories will be fighting for the family vote in the forthcoming general election. The BBC's social affairs analyst Roger Wicks examines the issues.

The political battle for the family vote has officially kicked off. February saw the Conservatives make a pitch for the 'traditional' family where married couples are supported.

Labour hopes that its attempt to support all mothers, whether married or not, in the Budget will go down well among a wider range of female voters.

The fight is an important one for both parties.

Labour won the female vote for the first time in 1997. William Hague is out to ensure that this was a one-vote wonder.

Budgeting for children

Gordon Brown's Budget promise of extra help for mothers was coupled with expected extra cash for the new children's tax credit.

Unlike the Conservatives, there is no emphasis on marriage. Help goes to all mothers, whether they are married, co-habiting or single.

Compare and contrast

The flagship working families' tax credit, which goes to low-paid workers with children, will rise by 5 a week from June.

The child allowance in income support, which supports the poorest families, will rise by 1.50.

The signals could not be clearer. Again the emphasis is on attempting to 'make work pay'.

The new children's tax credit (CTC), which starts in April, was raised before it was even up and running - from 8.50 to 10 a week.

Chancellor Gordon Brown
Gordon Brown has offered help to new parents
The CTC is targeted at low and middle income families but does not help poor families who pay no tax.

Gordon Brown announced that in 2002, mothers will receive a "baby credit" of 20 per week, in the year of their child's birth.

Maternity leave will be extended from 18 to 26 weeks and maternity pay will rise from 60.20 a week to 75 next year, and to 100 in 2003.

But the much anticipated promise of paid 'paternity' leave - two weeks - will not come into effect until 2003.

Why tax credits?

The working families' tax credit (WFTC) goes to families where one adult is in work.

It is the government's attempt to overcome the 'unemployment trap' in which the jobless decline work because it would leave them little better off than benefits.

It is unclear whether the strategy has been successful. Jobless figures have fallen, but they may have done so anyway due to generally improved economic conditions.

Critics, from the Conservatives to prominent Labour backbenchers like Frank Field, argue that new Labour's love of tax credits only extends the means-test. Tax payers as well as people on benefits are now means-tested.

Conservatives

William Hague would bring back a version of the married couples' allowance which helps those with children under 11.

It was expected that the Tories would commit themselves to a full restoration of the married couples' allowance (MCA), abolished by Labour one year ago.

The MCA was an incentive in the tax system to get married - you paid less tax in wedlock than out. It had nothing to do with children.

In contrast Labour has said very little on marriage - its policies are designed to help all children, poorer children in particular.

So when a greatly modified version of the MCA was revealed commentators were quick to cry 'u-turn'.

family
Both parties are trying to win the family vote
The allowance would be directly linked to children, aiming to support both children under 11 and women who wish to stay at home.

Indeed, entitlement depends on 'the carer' (normally the woman) staying at home.

Her unused personal allowance (the first 4000 tax-free earnings) is transferred to the husband, doubling his allowance.

The policy does not help poor families who are out of work, because they do not pay tax.

Tax credit confusion

Eyebrows have been raised at the children's tax credit's qualification rules.

People who pay the higher rate of taxation (those earning 34,000 a year) begin to see the credit withdrawn - at 40,000 they will receive nothing.

But if each parent earns 32,000 (just below the higher rate threshold) they receive the full CTC, despite having a combined income of 64,000.

This seems quite an obvious anomaly - how has it come about? The issue is which 'taxation unit' is used, the individual or the family.

In recent years individual taxation has prevailed.

However, the benefits system normally works on the basis of the family.

Income support is calculated on the basis of whether the claimant is single, married and a parent. Likewise, the working families' tax credit.

What are tax credits?

Tax credits are one of Labour's key social policy innovations, though they were conceived in the United States.

The idea is to use the tax system in the same way as the benefits system.

The novel aspect is that the tax system can be used to give people as well as take it away.

Traditionally, the tax system takes money away for various purposes such as maintaining services.

Social security benefits are used to provide people with sums of money to meet various needs.

These include unemployment, retirement, disability and meeting the extra costs of bringing up children.

Could these needs be met more effectively through the tax system? The government appears to think so.

Gordon Brown describes this as the 'integration' of the tax and benefits system.

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07 Mar 01 | Budget 2001
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