The Employment Tax Credit and issues for the future of in-work support

Fran Bennett and Donald Hirsch with contributions by Frank Wilkinson, Mark Pearson, and Stefano Scarpetta

How can governments help working people on low incomes?

One way is to give them money through tax credits, as is the case for families with children and disabled people. The introduction in 2003 of a more general 'Employment Tax Credit', available also to some childless or non-disabled people, is a significant step in extending in-work support of this kind. This report takes stock of the trend towards topping up incomes of low-income families with someone in work. It considers the merits and potential drawbacks.

Overall, the authors suggest a balanced strategy to help these groups - with due emphasis on improving earnings through adequate wages and investment in human capital - rather than overemphasising government top-ups. This volume brings together a range of evidence and thinking on this subject, which was the topic of a seminar for key experts in the field in May 2001. Arguments around the Employment Tax Credit and its design are complex; the report will help people making and influencing policy in this area to take a rounded view - and to reflect on the overall development of strategies to 'make work pay'.