The government wants to create an integrated and seamless system of financial support for children. The aim will be to bring together working families’ tax credit, income support and the children’s tax credit which make up the current system of financial support for children. This new integrated child credit will be a radical reform of the tax and benefit system, affecting nearly all the 7 million families with children in the UK.The thinking behind the change is that families with children are more concentrated at the bottom of the income distribution than families without children. Lone parents tend to have lower incomes than couples with children, and large families have lower average incomes than smaller families. The design of the integrated child credit is an opportunity to rationalise the existing mechanisms for supporting families with children that have evolved over decades. Introducing an integrated child credit could cost around 1 billion pounds a year, with the gains concentrated on poorer families.
The Institute for Fiscal Studies has produced a commentary “Financial support for families with children” which sets out options for the new integrated child credit. It addresses a range of questions about how the credit could work and what distributional effects it might have.