Kinship carers exempt from cap on child tax credits

The exemption of kinship care families from a cap on the number of children in a household eligible for tax credits will save the government billions of pounds and keep many children out of the care system, campaigners have said.

In a debate this week, the House of Lords accepted a move to exempt families who look after children who can’t remain in their birth home from the two-child cap on tax credits, a key part of the government’s Welfare Reform and Work Bill.

The Family Rights Group said this exemption would cost £30 million in 2020/21, after it compared it with the government’s own impact assessment on families affected, but would help support new kinship care arrangements and save billions in the long run.

A briefing note prepared by the Kinship Care Alliance before the debate warned how limiting tax credits would have “plunge[d] new kinship carers into severe poverty”.

“The prospect of being forced into significant debt, and possibly being financially forced to move home, away from their own children’s school and support network, will inevitably and understandably prevent some potential kinship carers from taking on children,” it said.

“It would only require around 200 kinship carers in 2020/21 to be financially prohibited from taking on a sibling group of 3 or more, for care and court costs to outweigh any savings from the two child tax credit limit in that year.”

Billions of savings

It added: “95% of children living in kinship care arrangements are not ‘looked after’ by the local authority. Therefore by keeping children out of the care system these kinship carers save the taxpayer billions of pounds each year in care costs. However, the financial cost of raising the child typically falls directly on the kinship carers themselves.”

Also included in the exemption are adopters of sibling groups, and the exemptions will be enforced through regulations that accompany the bill.

Lord Freud, the junior minister for work and pensions, said the government recognised the role family and close friends play in caring long term for children unable to live with their parents.

“We recognise that in these cases such carers, often referred to as kinship carers, are not in the same position to make choices about the number of children in their family as other parents are,” Freud said.

Doing the right thing

Cathy Ashley, chief executive of the Family Rights Group, welcomed the news, and said it should give local authorities the knowledge that there is backing for keeping families together.

“Given the financial situation that local authorities are facing, this will help in terms of not having to pick up the costs that would have been lost to support kinship carers, or of having the children being in the care system because a family member couldn’t afford to have them,” Ashley said.

She added: “Kinship carers will not be financially penalised for doing the right thing in taking on more than one child, or if they are taking on children alongside their own. When local authorities are assessing family members they take into account whether they are in a financial position to do this. I think what this will do is provide both the family member, as well as the local authority, that bit of extra reassurance.”

However, the government did not accept an exemption for families fleeing domestic violence, as Lord Freud said it would “raise a number of practical questions”.

“For how long would the exemption be in place? Would it be permanent or just for a period of time? If it is the former, it places claimants in a very favourable position to other claimants even when they have managed to get their lives back on track,” Freud said.

The decision was criticised in the debate by Christopher Foster, the Lord Bishop of Portsmouth, who said: “I hope that the minister will understand how difficult it is for me and others to accept what sounds at the moment like a policy which gives a financial incentive to risk staying in a situation where children might be in danger of abuse or in physical danger.”