17 June 08 – Publication of DWP research report 493: Prospective effects of a larger disregard in the income support system

New research published today by the Department for Work and Pensions looks at the effects of the 2003 child support reform in the UK, whereby some Parents with Care (PWCs) were entitled to keep the first £10 a week of child maintenance paid to them when they were on Income Support (IS). The research models the effect the introduction of the £10 a week disregard had on the rate at which PWCs left IS.

The report was commissioned to Frontier Economics from DWP following a commitment made by the Government to provide further research into how a significantly higher disregard might affect work incentives. As a result the second part of the research investigates the likely effect of PWCs flowing on to IS as a result of moving to a higher maintenance disregard.

Subsequently the Government committed in the 2007 Pre-Budget Report to increase the child maintenance disregard to £20 a week by the end of 2008 with a full disregard in Housing Benefit and Council Tax Benefit. The disregard will then be increased to £40 a week from April 2010.

The key findings of the research are as follows:

• The direct effect of the £10 disregard reduced the rate at which PWCs left Income Support. The results also found the new administration of child support speeded up exits from Income Support, and the higher average child support payments associated with new cases speeds up exit from Income Support.
• The research indicates that a £40 disregard a week relative to a £10 a week disregard would have a 7.8% increase in the number of PWCs with a maintenance calculation on Income Support. The results also suggest a move to a £50 a week disregard would lead to a 9% increase in the number of PWCs with a maintenance calculation on Income Support.
• Expanding the disregard from £20 to £50 a week will increase compliance leading to an increase in maintenance payments that PWCs receive by £7.40; this illustrates the wider benefits the disregard can have on the overall child maintenance system and child poverty.
• The research however does not model the impact of a full disregard in Housing Benefit and Council Tax Benefit in child maintenance a policy measure which was announced in the 2007 Pre-Budget Report. This will act to increase in work incomes of PWCs therefore improving work incentives for this group. This should increase the exit rate from Income Support and counteract the adverse effect of a higher disregard as suggested from the findings of the research.
• We estimate that the overall net impact of increasing the disregards both in and out of work is a small negative impact on work incentives for Parents with Care. Therefore concerns about the work incentive impacts of the overall package of reforms are misplaced.

Notes to Editors

1. The research is based on data from the DWP administrative records of post April 2000 IS/JSA claimants which were matched to CSA records of all these cases whose Non Resident Parents (NRPs) had received a child support calculation (including NRPs whose child support liability is zero). JSA cases were dropped from the data (just over 10% of cases) and also all lone PWCs who were male (a further 8% of cases) were dropped. The data was then matched up with CSA records and left just over 11 thousand cases who had matching IS and CSA information to use as the sample in the analysis.
2. Research report 493 – Child support and work incentives: Prospective effects of a larger disregard in the Income Support system is published on the 17th June 2008. The report is available on the DWP website.

DWP Press office: 020 3267 5144
Out of hours: 07659 108 883