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From the purse to the wallet – design of tax credit policies

Income is not always shared equally within households, and those receiving income may have more say than other members of the household over how money is spent. Therefore, WBG has worked to highlight the importance of who social security payments are made to.

In the late 1990s the Labour government replaced Family Credit, a welfare benefit payment to low income families with at least one earner, with a more generous Working Families Tax Cred-it (WFTC). Although this was called a ‘tax credit’ it was not a tax rebate, but an additional wel-fare benefit payment. WBG was involved in debates about the new tax credit system and had some influence on the design of tax credits.

When WFTC was first proposed the government intended that it should be paid to the ‘main earner’ within a couple (usually a man). This was a change from Family Credit which had been paid to the main carer (usually a woman). The Women’s Budget Group argued that this would effectively transfer money from women’s purses to men’s wallets. WBG also highlighted research showing that money paid to mothers was more likely to be spent on children than money paid to fathers. Following advocacy by WBG and others, the government announced that couples could choose whom WFTC was paid to. In 2003, WFTC was replaced with two new tax credits, Working Tax Credit and Child Tax Credit. Child Tax Credit was paid to the ‘main carer’; Working Tax Credit to the main earner.

WFTC and later Working Tax Credit were available to households where at least one adult was in paid work for a minimum number of hours per week. There was also an additional “full-time” supplement for people working more than 30 hours a week. WBG argued successfully that this supplement should be available to couples where both partners were in paid work and their hours totalled more than 30 hours a week to encourage greater sharing of paid work and un-paid care between couples.