Do tax credits and benefits split up families?

10:28 05 March 2009

The flagship scheme of tax credits has been blamed for a doubling of divorce rates among low income parents with young children.

Tax credits, which were introduced a decade ago to cut child poverty, were intended to help single mothers and hard-working families.

However, it became apparent that a so-called 'couple penalty' meant that a mother can benefit from more than 100 extra a week by splitting from her partner.

The Royal Economic Society claimed that these tax credits give mothers married to men on low earnings a tempting incentive to file for divorce.

The divorce rate among mothers with low-income husbands rose by 160% in the three years after the benefits were brought in, the study found.

Marco Francesconi, of the University of Essex, told The Daily Mail: "The result that tax credits had strong employment and divorce effects on married mothers in poor households is very important."

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The findings were published in the Economic Journal. Professor Francesconi and two colleagues based their research on 3,235 couples tracked from 1991 through the British Household Panel Survey.

The report stated: "Women married to a partner who did not work or who worked fewer than 16 hours a week were more than 2% more likely to dissolve their partnership after the reform than their childless counterparts.

"This is a substantial impact on the divorce rate, representing an increase of almost 160% with respect to the pre-reform period.

"This response could have been an unintended consequence of the reform, which may turn out to be important for the evaluation of the longer-term success of the reform itself."

Tax credits provide a supplement to pay for parents who work for 16 hours or more a week. Tax credits are higher for those with children.

However while they reward mothers and children, the credits do not pay towards the upkeep of a second adult in a home who does not work. Therefore mothers who stay at home receive nothing.

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The Government's Office for National Statistics has estimated that 1.2million couples are 'living apart together'.

Ministers have acknowledged that children brought up by single parents or step-families are more likely to do perform worse in school, have poorer health, and could even lead to lives of unemployment or crime opposed to the children of married couples.

In 2008, research by the Institute for Fiscal Studies revealed that tax credits may be linked to the birth of 45,000 extra babies a year.