Front-loaded Child Benefit Bill [HL]

Interestingly, since the Second Reading debate in October, other think tanks such as Civitas have proposed a family support benefit, which would roll out £16 billion of government child benefit and childcare expenditure into a front-loaded payment. In August, the Policy Exchange think tank made a similar recommendation for what it termed a “baby boost” allowance for parents of children aged two and under, which would double child benefit and be funded by reallocating the significant underspend on tax-free childcare. It is that kind of thinking that this Bill is part of in terms of renewing the financial framework for families in the early years. Those costed proposals are important, because one criticism of the Bill was the upfront additional burden on His Majesty’s Treasury from a higher rate in the early years, even if the measure was ultimately cost-neutral, as there could be a correspondingly lower rate in later childhood. This reform of child benefit would be part of a much-needed redesign of financial support.

I heard at Second Reading what other noble Lords said around the expense of teenagers. No one is pretending that that is not also an expensive time, but parents are usually much less restricted in terms of the hours that they can work when their children are at school and childcare is much easier. That is also reflected in the fact that the Government give disadvantaged two year-olds, three year-olds and four year-olds all the hours that they do, usually free. Additionally, the age at which the benefit might taper off would be an age at which certain children find that they want to add to the family household income themselves.

There are advantages to this front-loaded child benefit being part of what we see as a greater overhaul of the system of financial support. However, that aspect of any new passage would need primary legislation, which is why this Bill has been brought forward. With the removal of the sliding scale, it is hopefully a very simple framework into which any Government could fit any detailed policy proposals.

Amendment 3 would insert a new clause to enable the Secretary of State to set different rates at which parents could choose to be paid in the early years and later in childhood. Importantly, that amendment would put all the policy implementation detail into the hands of Ministers to craft, so that it can be more easily changed as circumstances change than if it was in primary legislation. This would enable the front-loaded child benefit to be part of a suite of reforms benefiting parents in the early years. The second amendment makes that important change: it would no longer be up to parents to request a particular proportion, but the Government would set within the framework, for example, what proportion could be drawn down and within what age range of the children, et cetera.

As originally drafted, the Bill would have allowed the child benefit claimant to request the front-loaded payments without details of what the new rates would be and how they could be discounted in a child’s later life. That was not my noble friend’s intention, so that change in who has control would come through Amendment 3, and the delegated powers would be with the Government to develop the front-loaded system.

Briefly, I believe there is one point that the noble Baroness has raised which is not covered by the amendments. It is her query about why the Bill includes “without prejudice” in Clause 1(1B). The only reason that bit is there is as kitchen-sink legislation, just to make sure. Obviously, the provision referred to means that child benefit can never be lowered. We wanted to make it crystal clear now that even if you ended up with a group of parents claiming flat rate for the entirety of a child’s life, and then a group doing front-loaded plus decrease, none of those rates could be lowered. We are just kitchen-sinking it to make sure it does not provide any wiggle room for a future Government to say, “We’re raising child benefit, but those discounted years and the old years do not get the same percentage increase.” That is why the provision is there; it is without prejudice to that, so it would mean there could be no change to that fundamental principle—basically, that child benefit never goes down.

I hope that has clarified those questions for the noble Baroness and I beg to move.

The Bill provides, and the noble Baroness has confirmed, that the intent is that the amount payable over a child’s life would be the same, whichever path was chosen. My Amendment 2 says that it should be the same in real terms, which is there to allow me to ask the noble Baroness, Lady Berridge: is it the intention that front-loaded child benefit would be paid at nominal value—in other words, at today’s child benefit rates—or would some account be taken of the impact of inflation and change in purchasing power over the years?

Because I am sad, I did some back-of-the-envelope calculations, using the example of a family with two children who took the Policy Exchange model at the start of this financial year. I confess that I made the children twins to make the sums easier. If the money is paid out at nominal value—that is, today’s child benefit rates—I estimate that the total amount paid over 16 years would be £30,160.