CARE, the social concern charity, has called on Gordon Brown to restructure the way tax credits are operated in his Pre-Budget Statement, to allow them to be more progressive in the way they are able to relieve child poverty. In addition it hopes that they will be able to provide greater support for poorer two-parent families.

|TOP|The latest research released by CARE yesterday revealed that tax credits are still leaving approximately 86 percent of couples worse of living together than if they decided to split and live apart.

In particular, the way in which tax credits have been administered has been a major concern for CARE as well as many other organisations.

A hope has been raised that a new tax credit system can be established that will better offer support to children living in poverty, as well as supporting two-parent families that need help.

The Head of Public Affairs at CARE, Nola Leach said, “Many families have benefited substantially from tax credits, but they are leaving many two-parent families in poverty even where one or both parents are in paid work.”

Also commenting was Don Draper, CARE’s research consultant who said, “Tax credits are not well designed for dealing with child poverty. Whilst they lift most lone parent families out of poverty where the parent can work 16 hours a week and earn the minimum wage, they fail children in poor two-parent families. Many of these children are left in poverty even where their parent works full time.

|AD|“A lone parent with two children in social housing needs to earn as little as £81 per week to take the family above the poverty line. A similar two-parent family with the same housing costs would need to earn £304 per week – almost four times as much.”

One of the most worrying issues to arise from CARE’s recent research is that combining the effects of tax, tax credits and benefits over the current tax year, it appears that many couples will be worse off if they continue to live together.

CARE’s researchers carried out the research by surveying the finances of 74 low income families. They found that in 64 of the 74 cases the families were worse off due the fact that they lived together, even with the saving they would achieve in housing costs taken into account.

CARE state: “The average cost in loss credits and benefits of living together is £58 per week. In 17 cases the couples would have be worse off by more than £100 per week and in six cases by more than £170 per week. In one case, a family with average earnings would be worse-off by £206 per week.”

Research also reveals that on average it costs the Treasury £7,000 a year in lost revenue, additional tax credits and benefits for each couple that want to live apart.

In 1998 Gordon Brown announced that tax credits were being introduced and said that support would be based in family need and not the family structure. Yet despite this aim, CARE now argues that it is apparent that the current tax credit scheme fails this test.

Draper concluded, “They need to be changed so that they are as effective at relieving poverty in two-parent families as they are in lone-parent families and do not discourage couples from living together.”