Family Credit

Family Credit was a United Kingdom social security benefit introduced by the Social Security Act 1986 for low paid workers with children. It replaced Family Income Supplement

The benefit was designed for families with children where at least one person is working more than 24 hours a week, on average. This represented an exclusion with entitlement to Income Support. The work should be intended to last at least five weeks.

Calculation

These figures are using the rates current in 1997. There was a maximum credit for each family. To calculate it take one adult credit (it doesn’t matter whether there are one or two adults) of £47.65, plus an amount for each child:

         Under 11      £12.05
         11-15         £19.95  
         16 or 17      £24.80 
         18             £34.70

If the family’s net income, not including Child Benefit, Maternity Allowance or One Parent Benefit is £77.15 or less than they got the maximum. Income was calculated using the same principles as for Housing Benefit, but without a disregard for earnings. Up to £60 was deductible for the cost of childcare providing neither claimant nor partner can care for the children while working. If income is higher than this then deduct 70% of the difference from the maximum to work out entitlement. Add an extra £10.55 if the claimant works for 30 or more hours a week.

The benefit was paid by an order book, which will lasted for six months, no matter how circumstances change, unless someone else claims benefit for one of the children. If desired the money could be paid directly into a bank account.

If the claimant had capital of more than £8000 they couldn't get Family Credit. Capital of between £3000 and £8000 reduced benefit. If a child had capital of more than £3000 it was excluded from the calculation, but didn’t affect benefit otherwise.

In two parent families the woman was expected to claim. The claimant had to be actually working when they claim. Five weekly, or two monthly pay slips, or a statement from the employer were required. Self-employed people had to provide accounts or estimates of earnings.

Claimants were required to be present and “ordinarily resident” in Great Britain when they claim. The remunerative work had all to be in Great Britain.

Effect on other benefits

Taken into account in full for Income Support, Council Tax Rebate and Housing Benefit. People who got Family Credit were also passported to the NHS Low Income Scheme, cheap dried milk for babies, travel to hospital for treatment, and possible Social Fund grants for babies or funerals

Poverty Trap: A person who got Family Credit and paid Income Tax as well would not see more than 19p a week for each £1 a week pay rise. If they got Housing Benefit as well they could be on a marginal tax rate of 96%.