Vol. 470 No. 2
48 Mr. O'Dea asked the Minister for Social Welfare his views on the final report of the expert working group on the integration of the tax and social welfare systems; and his views on the rejection by the working group of basic income as an immediate option. [18570/96]
I received the final report of the Expert Working Group on the Integration of the Tax and Social Welfare Systems early this summer. The report sets out comprehensively the poverty traps and work disincentives in the present tax and social welfare systems, reviews a number of possible approaches to reform, and sets out priorities for future development of the system. I very much welcome the group's report. In charting options for future reforms, the report provides a significant and unique contribution to public debate in the area of poverty traps and work disincentives. The two key priorities identified by the group are reform of child income support and tax reform.
It is now widely recognised that some of the income supports for children contribute to poverty traps and disincentives to work. Reform of this is essential. As the working group's report points out, as well as the incentives arguments, there are strong social reasons for giving priority to tackling unemployment among families with children, to break the cycle of unemployment and poverty being passed down from one generation to the next.
The Government programme already commits us to reform in this area, and we have already been taking steps to reduce the disincentives effects associated with the current structure of child income support. We have been gradually improving child benefit, while reducing the relative importance of child dependant allowances. Child benefit has been increased by 45 per cent since this Government took office.
The report makes it clear that reform of child income support must continue. The group did not reach agreement on what form this could take, but puts forward a number of different ways in which the overall system of child income support could be improved, from the point of view of incentives. These are firstly, an integrated child benefit which would replace all the existing schemes with a greatly increased child benefit. This would be high enough to replace child dependant allowances and would be partially clawed back from the middle and higher earners through taxation. The second option is child benefit supplement, a payment in respect of children which would be related to the income of the family, regardless of whether that income comes from employment or social welfare. The third option considered by the expert group is to retain the broad structures of the existing system but to reform family income supplement to remove the poverty trap that arises where that payment interacts with the tax system. The Government will be looking at these options very carefully to develop the best strategy for continuing reforming this area in line with the commitment in the programme for Government of working towards a basic income for children.
The second priority identified by the group is the need to pay particular attention to the taxation of people on low incomes. The expert group's report recommends that policies for taxation of the low paid should be directed towards limiting and eventually abolishing the exemption limits, by increasing personal allowances at a faster rate than the exemption limits.
This Government has already made considerable progress on reducing the tax burden. Over the last two budgets, the personal tax allowance for a married couple has increased by £600; the general exemption limit for a married couple has also been so increased by £600 over the last two years. Progress has also been made on widening the tax bands.
