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The impact of tax credits on mothers' employment

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© Loughborough University
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Abstract

This study reviews the impact of Child Tax Credit and Working Tax Credit on working mothers. April 2003 saw the introduction of two new tax credits, Child Tax Credit and Working Tax Credit. Although working in different ways, these were both intended to support families with children, reduce child poverty, and make work pay for those on low incomes. They are a central plank of the Labour Government’s ambitious policy of reducing and eventually abolishing child poverty. This report: investigates the impact of the tax credits on the participation of women with children in the labour market ; explores why those eligible to receive these credits do not always take them up ; assesses whether the credits act as an incentive for mothers to reduce their working hours, and ; reviews the policy implications of the findings. The study used data from the three latest available rounds of interviews of the longitudinal Families and Children Study (FACS), 2002/03–2004/05. The methodology also has lessons for those interested in pinpointing the most appropriate way of modelling the impact of the new tax credits.

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