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Child Benefit (Rates) Regulations 2006

My Lords, like other noble Lords, I welcome the uprating statement, in particular the Budget announcements on tax credits. We know that if we are to continue our successful story in trying to beat child poverty, by definition benefits, particularly child tax credits, have to rise faster than earnings in order to go above the median 60 per cent figure. That is a tall order and the commitment of the Government to that and the willingness of the Chancellor of the Exchequer to fund it are impressive. The big problem about tax credits has been that in the 200,000 or so movements a year that we get in tax credits, the really big move beyond the £2,500 figure was of the second parent in a relationship going back to work. I suspect, but I have no evidence for it, that the figure of £25,000 may have been aligned with median earnings, roughly speaking, to cope with the effect of the first year. The noble Lord, Lord Oakeshott, is absolutely right about child benefit and second and third children. We are increasingly seeing that poverty is focused in larger families, often workless families, rather than in smaller families. Therefore, I hope that my noble friend will take back the noble Lord’s argument that we should be strengthening payments going to second and third children to mitigate the poverty in larger families. Half of poor children now live in larger families. Some help on the structure of child benefit or in tax credits would be welcome. I wish to comment on a small benefit that we seldom debate: guardian’s allowance. I welcome the uprating. It used to be stewarded by the Department for Work and Pensions but a few years back it rightly went to the Treasury. Guardian’s allowance is a modest additional allowance that is paid to a guardian—usually a grandparent, sometimes an elder sibling—to care for a qualifying child who has no parents. A parent cannot receive this allowance. The carer has the child benefit book. It was originally designed for orphans; for example, a child orphaned because his parents were killed in a car crash. Over the years, the allowance has been tweaked a little to extend it to ““moral orphans””; that is children whose parents have disappeared off the landscape, usually because one parent is dead and the other is in prison or in a long-stay mental health hospital. As a result, we have been able to get a little additional money—£11 or £12 a week—in addition to tax credits and child benefit to elderly grandparents, often pensioners, who late in life take on guardianship responsibility for a child who has no parent to care for him and who would otherwise go into the official care system where fostering costs are £300 per week or more. How many children does it affect? My figures are out of date, so my noble friend can correct me if I am wrong, but they show that this allowance helps some 3,000 children a year at a cost of about £2 million per year. It is a tiny benefit. Today, I ask my noble friend to see whether he can extend a little more widely the concept of a moral orphan—a child whose carers or guardians receive guardian’s allowance—in order to provide a more generous description. I was triggered to ask him this by a letter I received a couple of days ago. I have changed the names to anonymise the people. Mr and Mrs James are in their 60s and are shortly to retire. They have a teenage grandson, Pete. Their daughter died in hospital five years ago and, following that, her partner turned to drink and drugs. He is now addicted and has lost his home. Pete went to his grandparents to be looked after rather than go into the formal care system. The grandparents receive tax credits of about £10 per week and child benefit. All together, they receive an income of about £28 per week for Pete, which by no means covers the cost of a teenager. They applied for guardian’s allowance and, technically quite correctly, the decision-maker refused it because when their daughter died they knew the whereabouts of the child’s father. It was a matter of timing. Had the partner disappeared at the time of their daughter’s death, they could have applied for and received got guardian’s allowance. Had they applied for and received guardian’s allowance and the partner subsequently reappeared, the guardian’s allowance would not have been removed from them. They would have kept it. As it is, they have had no contact, so far as I know, with the child’s father—he has been off the landscape for three or four years. Yet, under the small print of the formula, although they are grandparents approaching pension age, already very hard-pressed looking after their grandson, who they love to bits, to avoid his being taken into care, they are financially penalised because of the way that we have drawn up the description of the guardian’s allowance. It is small beer money, £2 million a year among some 3,000 children, but it has been key to keeping many children out of the formal care system with the financial cost that brings and the huge emotional damage that it can do. We know what happens when children go into the formal care system; they seldom do as well as they would if they remained with a member of their extended family. I am not criticising the decision in the case I cited; it was technically correct. However, I ask my noble friend to take this matter away to see whether we can use guardian’s allowance more widely. Before this allowance went over the Treasury, the Department for Work and Pensions was exploring whether it could be used in a more generous and sensible way to help members of an extended family care for a child when there was genuinely no parent in play. That is often because one parent has died, but may be because the parent is in prison or a long-stay hospital or because, as a result of mental health problems, substance abuse and the like, the child can no longer be cared for by the parent and the parent cannot reasonably be expected to provide financial support. The whole burden of responsibility falls on the grandparents. I leave it to my noble friend to explore whether this requires primary legislation or whether it can be done through looking at tax credits, but I ask him to take this issue away and follow up the work that should have been done several years ago. We started to make the concept more generous, but we did not get far enough before the stewardship passed. I ask my noble friend to take up the baton today to see whether we can help to keep more children out of the care system by rethinking the role of the guardian’s allowance.