The package of financial support for a child's first year of life is set to change dramatically from April 1st 2011, with the consequence that babies born from this April face losing up to £5,500 in the first year of their lives.
April 1st 2011 is to be a grim day for many UK families – with babies born after this date destined to live in an era of greater family financial peril. The start of the new financial year sees a raft of family-related tax and benefit reforms, announced last year by the Coalition government, finally come into force.
The reforms, according to the Family and Parenting Institute, mean that a baby born in April 2011 could be more likely than a baby born in 2010 to witness its parents dip into poverty during the first year of its life.
Babies born in April 2011 face the following losses compared to those born in April 2010:
LOSS of £545 due to the abolition of the baby element of the Child Tax Credit. This affects all families with babies under one year old.
LOSS of £500 for if they are from a low-earning family and are not the first-born. The Sure Start Maternity Grant will now only be paid out upon the birth of a mother's first child.
LOSS of £48 in the financial year 2011-2012 due to the three year freeze in Child Benefit rates.
LOSS of up to £3,810 a year if their parents work limited hours and are unable to increase them. Changes to Working Tax Credit mean couples with children will have to work 24 hours, instead of the current 16, between them to receive it.
(However, parents who are able to increase their hours will have greater childcare needs. They face a LOSS of hundreds of pounds per year due to the reduction in the Childcare element of Working Tax Credits. The charity 4Children has calculated that for parents with one child in full time childcare this amounts to paying an extra £780 per year outside London and an extra £910 per year within London.)
The April 2011 baby will also lose out in comparison to the April 2010 baby due to two cuts introduced in January 2011:
LOSS of up to £500 due to the scrapping of the Child Trust Fund. This was a contribution of £250, or £500 for children of low income families.
LOSS of £190 due to the abolition of the Health in Pregnancy Grant
TOTAL POSSIBLE LOSS: £5,593
Dr Katherine Rake of the Family and Parenting Institute said: "Having a new baby is a time of particular financial and emotional stress for families. Many parents whose babies are born over the next months will wonder why the package of financial support in the first years of their child's life has been reduced so substantially.
"Parents with new babies have been asked to bear the brunt of much of the government's cuts programme. This is in addition to their family finances taking a hit from soaring inflation.
Furthermore, evidence shows that financial pressures can increase conflict within couples, contributing to relationship breakdown."
Dr Rake added: "The Prime Minister has said he wants to make the UK the most family friendly society in Europe. This is a laudable ambition. Now his government must explain how this will be delivered in an age of austerity."
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Note:
The loss of up to £5,593 is based on a hypothetical case of a low-earning couple unable to increase their working hours to 24. Exact losses depend on individual family circumstances.
The changes to arrive in April 2011 also include an above-inflation increase in the per child element of Child Tax Credit. This, alongside other measures such as a raise of the Income Tax Personal Allowance, will help some families mitigate the impact of the cuts. Many families, however, will be net losers from the tax and changes. See our Families in an Age of Austerity report for more details.
