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Tuesday, 22 May, 2001, 15:35 GMT
The family and children

Labour wants to end child poverty while the Tories are putting their faith in marriage - but will ordinary families be better off under either of them?


BACKGROUND

Family policy is set to be a key general election battleground.

For Labour, families are the building blocks of society and the party is committed to providing extra support for all parents through the tax and benefit system.

Tony Blair has also pledged to eradicate child poverty in the UK, in an apparent attempt to appeal to Labour's core support.

The Conservatives are equally keen to be seen as the party of the family and, in particular, marriage.

They plan to target tax cuts at middle income families, seen as potential floating voters, in some cases building on existing Labour initiatives, such as the Children's Tax Credit.

The key group for both parties - and a much-used phrase in the run-up to the general election - is "hard working families".

In other words, those who don't just rely on state hand-outs.


THE WORKING FAMILIES TAX CREDIT

Since coming to power, Labour has carried out the most fundamental reform of the tax and benefit system in a generation.

By moving from social security benefits to tax credits, Labour has transformed the way millions of people receive state support for bringing up their children.

Through initiatives such as the Working Families Tax Credit (WFTC), it has attempted to "make work pay" for low income families.

Working Families Tax Credit
Paid to low-paid workers with children
Replaces family credit
Paid through the pay packet
WFTC was introduced in October 1999 as a replacement for Family Credit, and is far more generous, costing around 5bn each year.

The idea is that people receive a higher level of support from the state when they are in work, through the tax system, rather than when they are out of work, through the benefits system.

The WFTC is available through the wage packet from employers, when an adult works more than 16 hours a week.

Labour claims that 1 million families and 2 million children benefit from WFTC.

The party has also introduced a childcare credit, for those paying for registered childcare, and a Disabled Persons Tax Credit, which has replaced the Disability Working Allowance for disabled people in low income work.

Overall, even families with children that earn close to the average wage of 15,000 per year will now be eligible for the WFTC. If they have huge child care costs, they may qualify for the tax credit even if they earn well above the average wage.

But the Liberal Democrats and the Conservatives claim that WFTC is too complicated and places an undue burden on the employers who have to administer it.

The National Association of Citizen's Advice Bureaux found many families were losing out if they went back to work and claimed the WFTC, because people with a job do not qualify for benefits such as free school meals, housing benefit and council tax benefit.

Overall these families could be worse off with a job than without.

Some parents had even been sacked from their jobs because their employers found the tax break was too burdensome to administrate.

Both the Lib Dems and the Tories would pay WFTC as a benefit.

This way, they argue, the cash will go directly to the caring parent, in most cases the woman, rather than the wage earner.


THE CHILDREN'S TAX CREDIT

The Children's Tax Credit (CTC) is one of Labour's flagship policies for families with children, which had a prominent place in the chancellor's latest Budget.

Children's Tax Credit
Worth 8.50 per week
Replaces married couples allowance
Withdrawn for higher earners
It comes into effect in April as a partial replacement for the married couple's allowance, which was abolished in April 2000.

It is designed to top-up the income of most parents with children aged under 16 - but is gradually withdrawn when either partner earns more than 28,400 and pays the higher rate of income tax.

It will help an estimated 5 million families.

It was initially set at 8.50 per week, but Gordon Brown increased this to 10 a week, or 520 per year, in his March 2001 Budget.

He also introduced a 'baby bonus' of an extra 10 a week for parents with new born children during their first year - but that only comes into effect in 2002.

For people who qualify for the WFTC, from June the child care tax credit will also pay up to 70% of child care costs of up to 200 - instead of 130 per week as at the moment.

The Conservatives initially poured scorn on the CTC arguing that it was not an adequate replacement for the married couples allowance.

However, Shadow chancellor Michael Portillo has now pledged to boost the CTC for families with children under five by 200 a year, over and above Labour's budget increase, at a cost of 400m.

Mr Portillo has also said he will open up the benefit to higher earners.


BABY BONDS

Every baby born in the UK could be given up to 800 in savings under proposals revealed by Labour in April.

Baby bonds
Birth: 250- 500
Age 5: 50-100
Age 11: 50-100
Age 16: 50-100

The idea is to boost savings for poor families to help give everyone an equal start in life.

Poor families would receive a child bond of 500, with top-ups of an additional 100 at ages 5, 11, and 16, while better-off families would receive half that amount.

The money could not be spent until the child's 18th birthday, and there might be restrictions on what the money could be spent on.

The Conservatives have dismissed the plans as a "pre-election con" which would not compensate families for Labour's stealth taxes.


MARRIED COUPLES ALLOWANCES

The Tories have promised tax breaks for married couples, which could cut their annual tax bill by up to 1,000.

But the offer is only open to couples where one partner stays at home to look after a child aged under 11.

The policy stops short of fulfilling William Hague's pledge to restore the married couple's allowance (MCA), but would re-introduce a recognition of marriage into the tax and benefit system.


CHILD BENEFIT

Child benefit, which is paid to all families regardless of income, has survived the recent upheavals in the social security system.

It is one of the few remaining universal benefits, but rather than allowing it to wither Labour has increased it significantly over the course of the current parliament.

It has gone up from 10.05 a week for the first child and 9 for additional children in 1997 to 15.50 and 10.35 respectively, from April 2001.

Only the Liberal Democrats plan to significantly change child benefit, paying more to families with young children and reducing the rate for high earners.

Child benefit
15.50 per week for the first child
10.35 per week for each subsequent child
Labour has also increased the child element in income support, the means-tested safety net available to families where no-one is in work.


MEANS-TESTING

For Labour's critics, targeting of benefits is just another way of saying means-testing, for so long a dirty word in the Labour movement.

Images from the 1930s of unemployed people being weighed by social security officials to find out if they are entitled to welfare, cast a long shadow in some sections of the Labour party.

Today, people who need help from the state must open up their finances to scrutiny and answer a series of questions about their personal circumstances.

Under Labour's welfare-to-work programme, employers also have access to much of this information.

The Conservatives have recently found themselves in the unlikely position of defending the dignity of welfare claimants and pensioners in particular.

The party has pledged to reduce means-testing, if not eradicate it altogether.

The growing complexity of Labour's approach has also come in for criticism.

With the addition of the Children's Tax Credit in April, there will be four separate benefits or tax credits available to families.

For this reason, Labour plans to link them together - with the exception of child benefit - into a new 'integrated' child credit in 2003.

Labour's system has also been criticised for not being flexible enough to cope with those who frequently change jobs or work on temporary contracts.

And it also fails to help the poorest in society who generally don't pay tax.




LABOUR'S WAR ON CHILD POVERTY

Tony Blair took some commentators by surprise in 1999 when he pledged to eradicate child poverty in 20 years and halve it in 10 years.

His words were a deliberate echo of William Beveridge, who despite being a Liberal had a profound influence on Labour's establishment of the welfare state following the Second World War.

But up to that point, New Labour did not have a good record of helping the poorest in society.

The Child Poverty Action Group (CPAG) has condemned the party's record in the first two years of its administration, although it adds that "substantial progress" has been made since then.

Defining those in poverty as households with income less than half the national average after housing costs, CPAG says Britain has one of the highest rates of child poverty in the Western world.

According to its estimates, about three million children will be living in poverty at the time of the general election, down from a peak of 4.5 million.

Labour has a raft of initiatives, such as Sure Start, designed to help failing families in poor areas with extra support at home and in nurseries.

It is also considering giving all teenage mothers free full-time childcare if they undergo training or return to school.

But even if the party's welfare to work policies prove highly effective, many families will continue to depend on Income Support.

In the unlikely event that the New Deal resulted in every parent with children over five taking paid work, the level of child poverty would still only be halved.

Latest research by LSE Professor David Piachaud and Holly Sutherland of Cambridge University shows that Labour's policies will reduce the number of children living in poor families by 1.2 million.

But while most households with children will be better off under Labour, 300,000 children in the poorest households have seen a drop in their families' incomes.

And, the research claims, further measures to redistribute income to poor families and to boost child care will be necessary if Labour is to meet its ambitious target.

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