Modelling take-up of Family Credit and Working Families' Tax Credit
AbstractMany people in the UK do not claim benefits to which they seem to be entitled. Amongst those of working-age, take-up rates for Family Credit ֠an in-work benefit available to those with children and working at least 16 hours a week ֠were the lowest of the main three means-tested benefits. In 1999, the UK Government replaced Family Credit with Working Families' Tax Credit, which was more generous, and delivered in a different way from FC. As a prelude to further work (now published as an update to this in the final report), we have analysed the decision to take up FC, and how take-up changed during the initial 6 month phase-in period of WFTC. Although there are differences in how well each records receipt of FC, we find reassuring similarities in comparable econometric models of take-up estimated on three different micro-data-sets. Entitlement, earnings, non-labour income, and education attainment are the most important determinants of FC take-up. We investigated FC take-up in greater detail using only the Family Resources Survey. Social renters are more likely to claim FC than owner occupiers or those in the private rental market, and we find that housing benefit recipients seem to under-value the potential fall in HB when considering whether to claim FC. We find that the Family Credit childcare disregard had little impact on the likelihood of take-up. Take-up of WFTC, conditional on entitlement, fell immediately after its introduction, compared to FC, but the majority of the effect is explained by the relatively low take-up rates of those families who were not previously entitled to FC. This is unsurprising, as we would not expect this group to have claimed WFTC on the first day of its existence. Work currently in progress is examining how take-up of WFTC, and the factors associated with take-up, changed between April 2000 and March 2003.
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Date of creation: Dec 2003
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London School of Economics and Political Science, vol. 64(253), pages 81-100, February.
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