Post-legislative scrutiny: Child Benefit Act 2005 � Cm 8132 July 2011 Post-legislative scrutiny: Child Benefit Act 2005 � Presented to Parliament by the Economic Secretary for HM Treasury by Command of Her Majesty July 2011 Cm 8132 £ 8 .5 0 Official versions of this document are printed on 100% recycled paper. When you have finished with it please recycle it again. If using an electronic version of the document, please consider the environment and only print the pages which you need and recycle them when you have finished. © Crown copyright 2011 You may re-use this information (excluding logos) free of charge in any format or medium, under the terms of the Open Government Licence. To view this licence, visit http://www.nationalarchives.gov. uk/doc/open-government-licence/ or e-mail: psi@nationalarchives. gsi.gov.uk. Where we have identified any third party copyright information you will need to obtain permission from the copyright holders concerned. Any enquiries regarding this publication should be sent to us at CIRT Team HM Treasury 1 Horse Guards Road London SW1A 2HQ E-mail: [email protected] This publication is available for download at www.official- documents.gov.uk This document is also available from our website at hm-treasury.gov.uk ISBN: 9780101813328 PU1102 Printed in the UK by The Stationery Office Limited on behalf of the Controller of Her Majesty’s Stationery Office ID 2441241 07/11 Printed on paper containing 75% recycled fibre content minimum. MEMORANDUM TO THE TREASURY SELECT COMMITTEE Post-Legislative Assessment of the Child Benefit Act 2005 1. Introduction 1.1. This memorandum provides a preliminary assessment of the Child Benefit Act 2005 (c.6) (“the Act”) and has been prepared by Her Majesty’s Treasury for submission to the Treasury Select Committee (“the Committee”). It will be published as part of the post-legislative scrutiny process set out in the Command Paper Post Legislative Scrutiny – The Government’s Approach (Cm 7320, 2008). 2. Summary 2.1. The introduction of the measures in the Act coincided with an above-average increase in participation rates in education amongst 16 to 19 year olds, but a decrease in work based learning for 18 to 19 year olds. 2.2. However it is very difficult to draw any robust conclusions about what caused this rise in participation, and in particular about the contribution of the Act. 2.3. This is due to the nature and quality of the data available and the interaction between the policy, economic and demographic changes around this time that could have had an impact on participation rates. 3. Summary of the objectives of the Act 3.1. The Act received Royal Assent on 24 March 2005. Prior to its enactment, Child Benefit could be claimed in respect of all children under the age of 16 and those under the age of 19 who were in full-time non-advanced education. 3.2. In 2004, a review of financial support for young people was carried out which resulted in the White Paper, Supporting Young People to Achieve: a new deal for skills. The paper outlined a package of measures aimed at making all 19 year olds ready for work or higher education, which included some proposed changes to Child Benefit. 3.3. The Act, and regulations enabled by it, gave effect to those proposals by introducing two key reforms to the payment of Child Benefit to those aged 16 to 19 from the commencement date of 10 April 2006: The definition of a “qualifying young person” was introduced which included not only those in full-time non-advanced education but also those undertaking certain work based learning placements; A qualifying young person could continue to claim Child Benefit until their 20th birthday if they had started their course or training before reaching age 19. 3.4. By extending support that was previously only available to the families of young people who remained in full-time education, the Act aimed to encourage and support more young people to remain in training or education up to a Level 3 Qualification by the age of 19.1 3.5. This Act also aimed to bring the eligibility criteria for Child Benefit into line with the criteria already in place for continued Child Tax Credit support. 3.6. The changes enacted were projected to lead to £140 million extra spending on Child Benefit during the first year (2006-2007) and £170 million each year thereafter. 4. List of documents relating to the Act 4.1. Child Benefit Act 2005 and explanatory notes: http://www.legislation.gov.uk 4.2. Child Benefit Bill Regulatory Impact Assessment: http://www.hm-treasury.gov.uk/d/RIA_final_Lords_100205.pdf 4.3. Child Benefit Bill, draft indicative regulations: http://www.hm-treasury.gov.uk/d/draft_child_benefit_regulations_10_january.pdf 5. Detailed background 5.1. Budget 2003 announced a review of financial support for 16 to 19 year olds, to report in Spring 2004 with the aim of examining: The financial incentives for young people to participate in education and training and the interaction between this support and any new minimum wage for 16 and 17 year olds; the financial support for young people and their parents or carers, including those who are living independently and those in very low paid employment; and how the system of financial incentives and support could be rationalised. 5.2. The review highlighted that despite the high number of highly skilled workers in the UK economy, the proportion of UK workers with low or no skills stood at 39 per cent. This compared poorly to other OECD countries (13 per cent in Germany, for example). 5.3. One of the root causes of this problem was identified as being the level of qualifications and training attained by young people in the UK by the age of 19; the participation rate of 16 to 19 year olds in further education or training was so low that the UK was ranked 27th out of 30 OECD countries. 5.4. The review cited evidence that continued participation in education and higher qualifications were key drivers of social inclusion for young people. In 2005, 34 1 Level 3 qualifications include: A levels, Advanced Extension Awards, GCEs in applied subjects, International Baccalaureate, Key Skills level 3, NVQs at level 3, BTEC Diplomas, Certificates and Awards, BTEC Nationals, OCR Nationals per cent of young people with no qualifications were not in education, employment or training (NEET) and 17 per cent of young people with Level 1 qualifications were NEET, compared to only 7 per cent of young people with Level 2 qualifications or above. 2 5.5. The review published its findings and recommendations in the form of the Supporting Young People to Achieve: A new deal for skills white paper. The vision of this report was to make all 19 year olds ready for work or Higher Education, and reverse the trends outlined in paragraphs 5.2 and 5.4. 5.6. To achieve this aim, the report made a raft of policy recommendations around reforming the 14 to 19 curriculum and creating a more coherent offer of financial support to 16 to 19 year olds. Of these, many were legislated and came into force over the next two years. These proposed reforms included, among other recommendations: guaranteed minimum weekly payments for apprentices; government-sponsored extension to the Modern Apprenticeships scheme; roll out of the Employer Training Programmes; Activity Agreement and Learning Agreement pilots; and above-indexation rises to the Child Tax Credit and to Child Benefit. 5.7. The review also drew attention to the complexities, anomalies and perverse incentives created by the existing financial support structure in the way in which the benefit rules applied in respect of some young people. The Jobseeker’s Allowance rules on severe hardship and estrangement created considerable difficulties for those young people for whom it was not possible to return to live with their family. The age 19 cut-off in Child Benefit, which was based around a normative view of two academic years of A-Level study completed before a young person’s 19th birthday, disadvantaged young people who, perhaps through childhood illness or disrupted family backgrounds, were unable to complete their education before they reached 19. Furthermore, paying Child Benefit and the Child Tax Credit only in respect of young people undertaking academic further education created a disincentive for those young people for whom vocational training offered a more fitting alternative that better suited their aptitudes and abilities. The review indicated the previous Government’s intention to bring forward a package of measures to deal with these issues. 5.8. The Act was introduced as a part of this policy response. The context is important, as it demonstrates that the Act was not introduced in isolation but as part of a wider agenda. As such, any analysis that can be carried out on success indicators for the Act should be tempered by the context that this reform was enacted at a time when an array of other reforms to the same policy area were coming into force. It is therefore very difficult to assess the impact of the Act in isolation. 2 Level 2 qualifications are: GCSEs grades A*-C, BTEC First Diplomas and Certificates, OCR Nationals, Key Skills level 2, NVQs at level 2, Skills for Life. These statistics are taken from Supporting young people to achieve: a new deal for skills, published by HMT, DWP, DfES, 2004, p.8. 6. Changes made by the Act 6.1. Child Benefit is a non-contributory, non-income-related benefit payable where a person is treated as responsible for a child.