Anomalies in child benefits will hit formal foster carers

Changes in benefits due to come in from April could leave some carers looking after children less well off. Gary Vaux explains how

The government has adopted a carrot and stick approach to welfare reform as far as many families, and especially one parent families, are concerned. One otherwise positive reform that takes effect in April has an unintended consequence however – it has made private fostering a better financial deal for those people looking after someone else’s child rather than going down more official routes.

Since October 2008, many lone parents have been moved off income support and switched to jobseekers allowance once their youngest child reaches a certain age. That has gone down from 16, to 12 and now to 10 – with a final stage of the child’s seventh birthday being introduced in October 2010.

It may not even stop there – parents of even younger children may well be expected to undertake “work-related activity” as a condition of keeping their income support. On the other hand, both child benefit and child support are now disregarded when income is calculated for working parents on housing benefit. This makes working more attractive.

From April 2010, this disregard of income relating to children, specifically child support, is extended to all other means-tested benefits. This matches what happens with child tax credits already.

Child support

The change is supposed to separate out child support from the benefit system, so that any money that a low-income “parent with care” receives from the “non-resident parent” won’t negatively affect that parent’s benefits. It makes child support an additional income, instead of a replacement income. This will benefit the child and be more acceptable to the absent parent, who otherwise sees their child not gaining from the money they provide.

Although very welcome in itself, this change creates a number of anomalies that the DWP’s colleagues in other government departments may have some concerns about. They have now made private fostering a much more lucrative option than official formal fostering, which is contrary to DCSF policy.

Someone who is an unregistered private foster carer can already receive benefits for the child (child benefit and child tax credit) simply by applying to Revenue and Customs and stating that the child is now living with them. If the parent doesn’t dispute that fact, CB and CTC are transferred over. If the parent does object, then HMRC decides who gets the benefits. If the new carer has been receiving income support since before April 2004, then they will also receive extra IS for having extra children in the house. If they are not on IS but are still claiming housing and council tax benefit, those benefits include an extra amount for each new child too.

Not only that, but the unofficially fostered child counts as a member of the household, which can determine what size property the claimant is allowed for HB purposes. None of these additional payments are offset by any child support that the private foster carer receives from the child’s parent. A formal foster carer, however, is unable to access any of those benefits for the child they foster, although the fostering allowance doesn’t count as income.

Another anomaly comes in the treatment of adoption, residence order and special guardianship order allowances paid by councils to people who have taken care of a child. For HB/CTB purposes, those allowances count as income up to the level of the child’s personal allowance (and disabled child premium), as they do for pre-April 2004 IS cases.

Gary Vaux is head of money advice at Hertfordshire Council. Please send any questions for him to judy.cooper@rbi.co.uk 

This article is published in the 18 February issue of Community Care magazine under the heading Anomalies in child benefits will hit formal foster carers