The £745m cut that could save the EMA
The Government is in a hole over education maintenance allowances (EMAs). While acknowledging the inevitable “dead weight costs” of such a benefit, there is also a body of evidence to support the view that the allowance reduces the proportion of 16 to 19-year-olds not in education, employment and training (Neet) because it is targeted on young people from low-income families. Yet, because of the fiscal deficit, retaining in full the £550 million spent on EMAs means similar savings must be made elsewhere.
The solution lies in looking at 16-19 financial support in the round, including 16-19 child benefit (£1.53 billion), 16-19 child tax credit (£2.25 billion) and EMAs (£0.55 billion). Encouraging 16 to 19-year-olds from the poorest families to stay on in education and training, supporting social mobility and preventing the loss of a generation to social deprivation must be worthwhile objectives.
Spending on EMAs should be retained by taking the sensible option of means-testing 16-19 child benefit. Interestingly, parents are not entitled to child benefit and child tax credit for every 16 to 19-year-old. Payments are only made if their students are in full-time further education and unwaged training. Some 15 per cent of 16 to 18-year-olds, for instance, study part-time, have jobs or are Neet, and so their parents do not receive child benefit and child tax credit for them.
Since child benefit and child tax credit payments for 16 to 19-year-olds are conditional on participating in education and training, they should be separated from those for younger children. To ensure that financial support gets to the families and young people who need it, 16-19 child benefit, 16-19 tax credit and 16-19 EMAs should cease at a common level of household income.
EMAs are already well targeted on young people from the poorest households. Eligibility ceases if gross household income exceeds £30,800. So 16 to 19-year-olds from middle and higher income families will stay on anyway.
Estimated savings in 16-19 child tax credit would be small at £43 million because it is heavily means-tested. Savings in non-means tested 16-19 child benefit, on the other hand, would be about £745 million.
The Coalition, however, is already looking to save around £320 million in 16-19 child benefit by restricting payments to lower rate taxpayers earning up to £44,000. The stiffer means-test of stopping child benefit above household income of £30,800 will therefore generate extra savings of about £460 million. Even so, this is only £100 million or so short of current EMA spending.
An argument against restricting 16-19 child benefit to household income of £30,800 is that it will extend means-testing. Yet, means-testing is the norm not the exception in post-16 education. Both parents claiming 16-19 child tax credit and students applying for 16-19 EMAs are means-tested. Furthermore, middle and higher-income families are means-tested when their children apply for maintenance grants to go to university.
Clearly, parents on low incomes could continue to receive 16-19 child benefit and tax credit, and 16-19 year olds continue to receive EMAs. Alternatively, all three payments could be paid directly to 16-19 year olds. HE students get their maintenance paid to them and the same should be the case in FE. Many poorer 16-19 year olds would have significant amounts of money in their hands. Indeed, a means-tested 16-19 Youth Allowance could be an important incentive for young people to stay on in education and training when the participation age is raised to 18 in 2015.
The Budget on 23 March provides the Coalition with a chance to solve the EMA crisis and create a system of 16-19 financial support that is focused on the poorest families and young people, and encourages social mobility.
Phil Willis is a former headteacher and Liberal Democrat education spokesman.