Low-paid people on family credit top 500,000: Claims reflect growth in part-time work

THE NUMBER of people claiming family credit, the benefit for those in low-paid work, has passed 500,000. As a result, more than 2 per cent of the workforce is having its wages directly supplemented by it for the first time.

More than one in seven employees in catering, cleaning and hairdressing may now be on family credit, and nearly 40 per cent of its recipients are employed in one of these groups, figures from the Department of Social Security show.

The rise in family credit claims - up 70,000 over the year to July 1993, and up 200,000 in three years - follows rule changes in April 1992 which meant that those working between 16 and 24 hours a week were eligible. The increase to 504,000 claimants thus reflects the growth in low-paid, part-time work - which critics say the benefit is helping to encourage by making it easier for employers to pay low wages but still recruit staff. Average earnings for those on family credit were just under pounds 105 a week; average benefit payment was pounds 44.45.

Numbers are also rising sharply because since April 1992 lone parents have been allowed to keep the first pounds 15 of any maintenance payment without having it knocked off their family credit - a move which saw the number of single-parent claimants jump by 20 per cent between July 1992 and July 1993, compared with 10 per cent for two-parent families.

Another boost to the pounds 1bn-a-year bill is expected in October when a new pounds 28 allowance for childcare costs is expected to help about 50,000 lone mothers.

Frank Field, the Labour MP who is chairman of the Commons Select Committee on Social Security, said the benefit was 'in many ways a success, certainly much more successful than the family income supplement which it replaced'.

It was, however, 'the logical outcome' of the Government's drive to cut wages at the bottom end of the labour market and it contained a dilemma. 'It is a way of getting help to people in low-paid work, but you have all the time to be vigilant to ensure employers are not using it to pass on their legitimate costs to the taxpayer. Some of these people on family credit will be paying tax to subsidise their own employers' low- wage policies.'

He said family credit should be linked to targeted training so people could lift themselves off it. 'Without that, the Government does stand open to the charge that it is using taxpayers' money to subsidise low-paid employment'.

Equally, if the Government was going to continue to 'American- ise' the labour market in this way, the benefit should also be available to those without children.

The sharp increase in family credit numbers came before the abolition last August of the wages councils, a move which is expected further to increase claims if employers cut wages.

Mr Field said: 'If you don't get a rise in family credit numbers after weakening and then abolishing wages councils then I don't know what will produce one.'