Miriam Cates is the Conservative candidate and former MP for Penistone and Stocksbridge.
The most expensive state benefit costs the taxpayer £135 billion a year. This benefit is not means tested; it is paid universally to rich and poor alike, whether working or unemployed. Its maximum value is the same for everyone and increases every year, regardless of how much money the recipient contributes in tax.
This benefit is paid in cash and can be spent on bread or booze, firewood or fags. This benefit can be claimed by those who are careful with money and by those who are reckless and imprudent, falling back repeatedly on the state’s safety net.
This generous, no-questions-asked benefit is, of course, the State Pension.
Contrary to popular understanding, British senior citizens do not draw their state pension from a ‘pot’ into which they have paid through taxation and national insurance; rather, state pensions are paid out of current taxation, taken directly from working-age people. Some pensioners pay far more in tax during their working lives than they will claim in pensions and public services, but for many the opposite is true.
The average cost of the state pension to each individual income tax-payer is £3600 a year. Yet the existence – and the terms – of the state pension have strong public support.
Many pensioners do not need it – one in four are millionaires – and many may not ‘deserve’ it. Yet there is no political demand to change the terms of the state pension or abolish it. In fact, the reverse is true; there is a strong public consensus that it is moral and humane to support people in their old age.
Sadly this unconditional generosity does not extend to dependents at the youngest end of society.
Since 1946 – predating the advent of the state pension by two years – family allowances have been paid to parents to help with the costs of raising children. In a White Paper in 1942, the Government of the day argued that a universal family allowance would lessen the risk of malnutrition in larger families, correct the effect of a wage system which pays little regard to family responsibilities, and encourage parenthood to counteract a falling birth rate.
For the next six decades, these arguments held sway. Family allowance evolved into child benefit, and the Blair Government introduced additional tax credits to help families on lower incomes.
The principles behind using public funds to help all families with the cost of raising children are the same principles that underpin the universal state pension: early childhood and old age are periods of vulnerability and dependency for all, and, through the welfare state, we recognise that each dependent individual has a stake in Britain’s future (or, in the case of the elderly, our past).
But George Osborne shattered this sixty year old social contract when, as Chancellor, he introduced the two-child benefit cap, effective from 2017. This cap means that, for any family receiving state benefits, no additional support could be claimed for third and subsequent children born after 2017. This costs affected families an average of £4000 a year, and will apply to greater and greater numbers of children as time goes on
The Cameron Government was under pressure to reduce the size of the welfare state after a period of reckless borrowing and spending by the previous Labour government. Many difficult and unpalatable decisions had to be made.
But the two-child benefit cap has had a far-reaching impact, not only making life harder for poorer families but also fundamentally altering the way we think about children. The Government sent a clear message that having more than two children was a luxury, something that should only be ‘purchased’ if you can afford it.
This is of course a very sensible argument if you are considering buying a Porsche – don’t do it unless you can afford to run and maintain it. But children are not luxury cars; they are not a luxury at all. Children are, quite literally, the future of our country. With a below-replacement birth rate since the 1970s and more and more people not having children at all, it is vital for our future economy that those who want to have larger families do so.
Many like me will also be uncomfortable with the fact that, for a low-income woman who finds herself pregnant with an unplanned child, the implicit message of the policy is that abortion is the ‘responsible’ choice.
None of this is to say that parents should not provide for their offspring; of course they should. It is first and foremost the responsibility of parents to earn money to feed and clothe their children. It is morally wrong for a workless woman or couple to decide to get pregnant in order to claim more state benefits.
But if there were large numbers of ‘feckless’ women deliberately having more children to increase their Universal Credit allowance, we would have seen a sharp fall in third births among mothers on benefits since the policy was introduced.
This is not the case; the only thing that the two-child limit has ‘achieved’ is to push hundreds of thousands of innocent children into poverty. And children growing up in poverty have worse outcomes in adulthood – outcomes that have a cost for our whole society.
Significantly, it is not only the very poorest who now struggle with the costs of raising children. Fully 60 per cent of the families are therefore affected by the two-child cap – and therefore in receipt of state benefits – are in work. Half are single mothers who undoubtedly can’t afford to work because of the price of childcare.
The problem that we face is not that large numbers of parents are unwilling to work; rather economic conditions for families are now so challenging that even those with ordinary, worthwhile jobs – such as retail workers and delivery drivers – cannot afford to make ends meet without support from the state.
And this is where the link with pensions comes in. One of the reasons why families’ net income is so low is that taxes are so high; the reason that taxes are so high is that pension and NHS costs mount each year as the population ages.
The cost of living for families is also high because housing costs are high, due to a thirty year housing market boom that sent property prices soaring. This boom greatly enriched those who are now retiring, but made homes completely unaffordable for many ordinary young adults. No wonder so many working families have to rely on benefits.
It is all very well for conservatives to say that we believe in personal responsibility and a small state. But we have willingly taken a socialist approach to funding the cost of old age. Whether or not you live a healthy lifestyle, whether or not you have contributed enough in tax, whether or not you personally have children, your pension, health, and personal care will be paid for by the taxes of other peoples’ children when you retire.
In fact, the less carefully you have managed your money the better; with no savings, your care costs will be covered by taxpayers in full.
Before the welfare state, there were huge economic benefits to having children; how else would you be provided and cared for in your final years? But as Britain has socialised the cost of old age, we have privatised the costs of having children.
This is philosophically inconsistent and economically incoherent. Having severed the natural and traditional economic link between childbearing and elderly care, there is now little financial incentive to raising children and plenty of economic cost. Is it any surprise the birth rate has fallen?
In fact fertility rates have declined so dramatically that we are running out of taxpayers to pay for pensions. Either we accept that most parents can’t raise children without state help and reorganise our welfare system to support families, or we re-privatise the costs of old age. I suggest that only one of those options is politically – or morally – palatable.
In Britain we are outliers in our lack of support for families through the welfare system. Many British families pay 30 per cent more tax than our European and American counterparts, and our child allowances are meagre. In France, rather than receiving no benefits for a third and subsequent child, parents are rewarded with an additional payment.
We should be doing everything we can to help parents, whether they want one, two, three or more children. Each additional child born represents a future contribution of forty years or more of labour and taxation.
But having children is not just an economic benefit to our country; it is a social good too. A culture that loves, welcomes, and supports children unconditionally is one that has hope for the future. Conservatives should support the scrapping of the two-child benefit cap as the first step towards rebuilding a child-friendly Britain.