Family Credit 'little use to unemployed'

Family Credit, the Government's flagship benefit for those in low paid work, does a far better job of protecting people already in work than getting the unemployed back to work, new research showed yesterday.

The finding challenges the assumption behind plans of both Labour and the Conservatives to boost in-work benefits in order to get the jobless back to work. Family Credit seems to be acting as a safety net for those who are already working rather than as an incentive for the unemployed to take work.

The study, funded by the Department of Social Security, examined the work histories of 1,000 families leaving Family Credit in September 1993.

It showed that only 10 per cent had started to claim on entering a new job. Most had been in work for a long time, using the benefit to stay working when their income fell or when one partner became unemployed. An even smaller proportion - 2 per cent - successfully used Family Credit to leave Income Support and earn enough to work their way out of Family Credit.

Alex Bryson, the Policy Studies Institute researcher who carried out the study, said: "It shows there is no certainty that offering an in-work benefit is going to act as a serious incentive for people to move into low paid work from unemployment."

Other barriers, such as the uncertainty of taking low paid work when on the dole, may need to be addressed.

Around 600,000 couples and lone parents now claim Family Credit and the Government is about to pilot an extension of the benefit to single people through a new Earnings Top-up.

The benefit does a good job of keeping low-paid families in work "tiding them over until things get better", the study concludes. But it works better for couples than lone parents, many of whom end up unemployed again.