Front-loaded Child Benefit Bill [HL]

Baroness Sherlock Excerpts

2nd reading
Friday 8th July 2022 Lords Chamber

[Baroness Sherlock (Lab)]

My Lords, I thank the noble Lord, Lord Farmer, for introducing his Bill and explaining the reasoning behind it, and I thank all noble Lords who have spoken.

I am rather attached to child benefit, and not just because it was a Labour Government who introduced it, phasing it in from 1977, replacing family allowances and child tax allowances. I am not claiming that we invented state support for kids; of course, child tax allowances go back, I think, to 1798, although they disappeared for most of the 19th century. However, after a long campaign by the likes of Eleanor Rathbone, child tax allowance having come back, it was joined by a universal payable family allowance in 1945 as part of the post-war settlement. Of course, family allowance was one of the three pillars of the welfare state in the Beveridge report, along with health and maintenance of employment. It was introduced originally at five shillings a week—I think Beveridge wanted eight shillings but got negotiated down to five shillings; the Minister may recognise that, even in modern times—and after some initial controversy, it was paid direct to the mother.

Eventually, however, the Labour Government decided to replace both family allowance and child tax allowance with a universal, non-means-tested payment for all children: child benefit. It has been incredibly popular ever since: so popular that, although its value has been allowed at times to erode, the principle of universality has never been touched. There was one exception, however: George Osborne decided to claw it back from higher-rate taxpayers, which in my view was an unwise and messy piece of policy-making.

As a universal payable benefit, child benefit represents the transfer of resources from taxpayers as a whole to families with children. Those who do not have children subsidise the cost of raising all children because it has always been recognised, in the language of economics, that children are a public and private good—or, in normal language, parents love their kids and are responsible for them but we all have a stake in this because we all need children as the next generation to staff our public services, run our economy and, crucially, pay my pension. We all have a stake in making sure that we contribute.

My noble friend Lord Kennedy and others have mentioned the costs of raising children. CPHE does regular research into the additional basic cost of a child from birth to the age of 18. In 2020, it was £71,611 for a couple family and £97,862 for a lone-parent family. If you add in housing and childcare, those figures go up beyond £150,000 and £185,000 respectively. I have been doing some back of the envelope—or calculator on an iPhone—calculations. My rough attempt is that, in today’s money, child benefit gives £20,400 for the first child from birth to the age of 18, and £13,500 for later kids. It is helpful but, as we can see, it does not begin to cover the costs of raising a child—nor is it expected to. Of course, extra help is available on a means-tested basis.

What of the idea of front-loading it? As has been noted, this is very much a framework Bill, so I will have to work on some assumptions around the ideas in the reports from the Social Justice Policy Group and Policy Exchange, which have been mentioned previously. They suggest allowing the front-loading of perhaps as much as half the total lifetime allowance in the first three years and tying it to some form of inspection to make sure that parents are being good parents.

The interesting point is that different cases are being made by the noble Lord, Lord Farmer; I am sympathetic to all of them in different ways. There is the case that the early years are particularly important for a child’s development and that it is good for a parent—often, but not necessarily, a mother—to be at home with the child during that period. I am sympathetic to the state enabling a parent to make a choice about being with their child in the early years but I have a specific question: what would this policy be designed to do? Is it to encourage or enable a parent to stay at home with their child in the early years? Is it to direct more money into families in the early years because of a recognition of either the scarring effects of poverty on early life or, as the noble Lord mentioned, the importance of neurological development? Is it because parents believe that the early years are more expensive? We might find different policy solutions to those different problems.

If the policy is designed to enable a parent to stay at home, we need to look at the question asked by the right reverend Prelate the Bishop of Durham: how much would it need to be to make a difference? Again, here are my admittedly probably dodgy calculations. If you directed half of a child’s lifetime child benefit into the first three years, in today’s money, that would give you about £65 a week instead of £21.80 for the first child, and about £43 a week instead of £14.45 for later children. I am sure the Minister will be able to correct that if needed from his Treasury brief, but that was the best I could do with my iPhone’s calculator. That money would be welcome, but I have a question for the noble Lord, Lord Farmer: would it make enough of a difference to enable a parent to stay at home, as opposed to not doing so? Failing that, would it make enough of a difference to enable a parent to pay for childcare so that they can go out to work, as opposed to not being able to make that choice?

The noble Baroness, Lady Berridge, made a really important point about the problems with the support we offer through universal credit for childcare. The Government must take action on that. It is great to offer parents 85% of their childcare costs but, frankly, if they cannot afford to pay the first month’s money, they can never use it; it is therefore of no value at all. Even worse, it is of most value to parents with the most money because they are the ones who can afford to pay the first month and get into the system in the first place. However, I will take some persuading that the best way to deal with the fault in the design of universal credit is by redirecting child benefit, which parents will also need for the costs of raising children, not just the costs of paying for childcare.

Perhaps, then, the aim of the policy is to direct money into the early years? I believe very strongly in investing in early years for both children and parents, which is why I am so proud of the work of the last Labour Government in this area in increasing financial support for children, particularly in the early years, and, crucially, providing support through things such as Sure Start. On one level, I would say that, wouldn’t I? I was an adviser to Gordon Brown, working in the Treasury on these matters at the time. I have to say, probably the single most heartbreaking moment of my life in politics came when I sat on the opposition Benches and watched all that work be dismantled when I first came into this House. It really was heartbreaking. I suppose my question to the noble Lord, Lord Farmer, is this: although we both want to see investment in the early years, given the worrying rates of child poverty among families with children of all ages, is he convinced that this investment is best funded by taking money from a child’s later years?

Then there is the question of where the financial pressures come. When parents first have children, they are often absolutely convinced that the early years are the expensive age; the noble Lord, Lord Balfe, gave us some examples of why they are incredibly expensive. However, I think most parents would confirm that, when children reach their later years, they do not get cheaper; they are just expensive differently. There is a lot of research on this but, if you go to any parenting board or on to any parenting website, you will see debates on it. One discussion on Mumsnet has parents arguing, with some saying, “Oh no, it’s childcare in the early years because they grow out of baby clothes so quickly”, but others saying, “No, no, it’s teens”. One wonderful comment says:

“Teens. Everything costs more, they grow out of expensive shoes on a weekly basis, they eat you out of house and home, they want clothes, they have hobbies, expensive school trips, calculators, books, pocket money, laptop, phone, bike, sports gear, then they leave it all on the bus”.


Not everybody would have, or could afford to have, all those things, but the underlying point is there: children have costs at every single stage. I am sure the noble Lord, Lord Farmer, has considered the impact on families who choose to take more money early in life then find, as my noble friend expressed, that things are very expensive later in life or that their circumstances change. They may have a child who needs extra help later in life. Their family may break up. Their employment circumstances may change. They are then left with even less money than the state thinks they need to raise a child.

My final musing is on the impact of any change such as this on the future of child benefit; the right reverend Prelate the Bishop of Durham alluded to this point. I think child benefit has survived for so long in an area where change is common and rapid because it is popular, simple and effective. Everybody understands it because every parent is entitled to get it for every child. I would not want to do anything to undermine that, so I wonder whether the noble Lord, Lord Farmer, has considered whether making it less simple and less obviously universal might in fact put its future popularity, and therefore funding, at risk?

This has been a very interesting debate. I would just say, in the margins, that my noble friend Lord Kennedy made the point that the thing parents most need is enough money to feed and raise their children. We cannot look at this without being aware of the context in which the Government have significantly—really significantly—cut benefits for children since 2010. Even when things got very bad recently and they had to intervene, all the interventions discriminated against families with kids. The universal credit uplift was welcome but there was no uplift in children’s benefits; it was the same for a single person as for a family with three kids. The recent Social Security (Additional Payments) Bill was again welcome but it offered the same amount of money for a single person as for a family with three kids, even though their energy costs and all other costs are much higher. We need to consider both the amounts of money being made available and the ways in which they are being made available and chosen.

Having said all that, I remain grateful to the noble Lord, Lord Farmer, for his continued interest in family policy and his determination to push his own Government to keep looking at how families are supported. At a time when politics is in turmoil, we have had a chance to take a deep breath and reflect on what is probably one of the most important questions in our political life: how do we, as a nation, enable parents to raise children who will not just survive but flourish, and will be the next generation of our country in the way we would all hope for?