Family Credit was a

social security Welfare, or commonly social welfare, is a type of government support intended to ensure that members of a society can meet basic human needs such as food and shelter. Social security may either be synonymous with welfare, or refer specificall ...

benefit introduced by the Social Security Act 1986 for low-paid workers with children in

Great Britain Great Britain is an island in the North Atlantic Ocean off the northwest coast of continental Europe. With an area of , it is the largest of the British Isles, the largest European island and the ninth-largest island in the world. It is ...

that replaced

Family Income Supplement Family Income Supplement was a means-tested benefit for working people with children introduced in Britain in 1970 by the Conservative government of Edward Heath, effective from August 1971. It was not intended to be a permanent feature of the socia ...

. The benefit was designed for families with children if at least one person is working more than 24 hours a week on average. That represented an exclusion with entitlement to

Income Support Income Support is an income-related benefit in the United Kingdom for some people who are on a low income, but have a reason for not actively seeking work. Claimants of Income Support may be entitled to certain other benefits, for example, Housi ...

. The work was to be intended to last at least five weeks.

Calculation

These figures use the rates current in 1997. There was a maximum credit for each family. One adult credit, regardless of whether there was one or two adults, was £47.65, plus an amount for each child that varied by age: £12.05 under 11, £19.95 from 11 to 15, £24.80 from 16 to 17 and £34.70 at 18. A family whose net income, not including

Child Benefit Child benefit or children's allowance is a social security payment which is distributed to the parents or guardians of children, teenagers and in some cases, young adults. A number of countries operate different versions of the program. In most co ...

Maternity Allowance Maternity Allowance is a United Kingdom state benefit for women who are working but not entitled to Statutory Maternity Pay. Main conditions Women who are unable to get Statutory Maternity Pay. Entitlement starts at the 11th week before the ba ...

or One-Parent Benefit, was £77.15 or less got the maximum. Income was calculated by using the same principles as for

Housing Benefit Housing Benefit is a means-tested social security benefit in the United Kingdom that is intended to help meet housing costs for rented accommodation. It is the second biggest item in the Department for Work and Pensions' budget after the state ...

but without a disregard for earnings. Up to £60 was deductible for the cost of childcare if neither claimant nor partner could care for the children while working. If the income was higher, 70% of the difference was deducted from the maximum for the purpose of entitlement. An extra £10.55 was added if the claimant worked 30 or more hours a week. The benefit was paid by an order book, which lasted for six months, regardless of a change in circumstances change, unless someone else claimed benefit for one of the children. One could choose to have the money paid directly into a bank account. A claimant with capital of more than £8000 could not get Family Credit. Capital between £3000 and £8000 reduced the benefit. If a child had capital of more than £3000, it was excluded from the calculation but did not otherwise affect the benefit. In two-parent families, the woman was expected to claim. The claimant had to be actually working during the claim. Five weekly, two monthly pay slips or a statement from the employer were required. The self-employed had to provide accounts or estimates of earnings. Claimants were required to be present and "ordinarily resident" in Great Britain when they claimed, and all remunerative work had to be in Great Britain.

Effect on other benefits

The amount paid through Family Credit was taken into account in full for calculating

, Council Tax Rebate and

. Those who got Family Credit were also passported to the

NHS Low Income Scheme The NHS Low Income Scheme is intended to reduce the cost of NHS prescription charges, NHS dentistry, sight tests, glasses and contact lenses, necessary costs of travel to receive NHS treatment, NHS wigs and fabric supports, i.e. spinal or abdo ...

, cheap dried milk for babies, travel to hospital for treatment and possible

Social Fund A social fund (sometimes also called ''Social Investment Fund'', ''Social Fund for Development'', ''Social Action Fund'', ''National Solidarity Fund'' or ''Social Development Agency'') is an institution, typically in a developing country, that provi ...

grants for babies or funerals. The

poverty trap In economics, a cycle of poverty or poverty trap is caused by self-reinforcing mechanisms that cause poverty, once it exists, to persist unless there is outside intervention. It can persist across generations, and when applied to developing count ...

was that someone who got Family Credit and also paid

income tax An income tax is a tax imposed on individuals or entities (taxpayers) in respect of the income or profits earned by them (commonly called taxable income). Income tax generally is computed as the product of a tax rate times the taxable income. Tax ...

would see no more than 19p a week for each £1 a week pay increase. A worker receiving

as well could have been on a marginal tax rate of 96p.

References

{{reflist Child welfare in the United Kingdom Social security in the United Kingdom

Calculation

Effect on other benefits

See also

References