Osborne Scraps Child Benefit For High Earners

[DJKillaQueen]

c/o Sky News online

Child benefit will be withdrawn from higher-rate taxpayers from 2013, the Chancellor has announced.

Speaking ahead of his speech to the Tory party conference, George Osborne said the decision was necessary to help the Government reduce spending.

He told Sky News the change would affect households where at least one worker paid 40% or 50% tax.

It means households where one person earns more than ?44,000 will have the benefit withdrawn, but families with two parents earning ?43,000 will still be able to claim it.

Around 15% of families - 1.2 million people - will be affected by the reform.

On average, these households earn around ?75,000. A family with two children stands to lose ?140 a month.

Mr Osborne said the move would save the Treasury ?1bn a year.

"We face a very, very serious economic situation. This country has some of the biggest debts in the world and we've got to pay those debts off," he said.

"I didn't particularly want to be the Chancellor of the Exchequer who takes this decision."

The announcement signals an end to universal benefits, although Mr Osborne said the Government would honour its commitment to maintain other payments such as the winter fuel allowance.

Children's organisations have criticised the move and said the Coalition has targeted a benefit that works.

Alison Garnham, chief executive of Child Poverty Action Group, said: "I was amazed that George Osborne said it was the right thing to do because we are quite clear that it's the wrong thing to do.

"It's very unfair that families with children should once again be taking the hit.

"Child benefit is a strategic benefit that works. It's simple and everybody understands it," she added.

Dr Katherine Rake, chief executive of the Family and Parenting Institute, said it would hit women hardest.

"For many women, even in higher income brackets, this is the only source of income they receive directly, giving them independence and control over family spending," she said.

"There have now been a suite of measures which have hit those with children particularly, at a time when many are struggling to make ends meet."

Yvette Cooper, the shadow work and pensions secretary, said families who "want to get on" are being made to pay more.

"Instead of boosting jobs and growth, the government is making families with children pay more.

"We support child benefit for all children and all families.

"Of course there are difficult choices to make and we need more welfare reform, but it's better to get the economy growing faster and raise more tax from the banks than to cut support for children in middle income families," she said.

The Chancellor also used his conference speech to announce a limit on the amount of benefits a family can claim.

Unless they have disabilities, they will not receive any more than the average working family earns, he said.

He also offered a fierce attack on the new Labour leader Ed Miliband.

Mr Osborne said market turmoil, a credit downgrade and a sharp rise in market interest rates would result from Labour's approach to the economy.

He told delegates: "Imagine, if I were to stand up in the House of Commons in two weeks' time and say: 'I'm cancelling the deficit plan. I agree with Ed Miliband. Let's delay the tough decisions. Let's borrow more. Let's go on adding to our debt.' Imagine if I said that."

The Labour leader has suggested that he will adopt a more cautious position on reducing Britain's borrowing and said he favours tax increases as well as any cuts in public spending.

The Chancellor cited last week's backing for his plans from the International Monetary Fund as evidence that the coalition Government, not the Labour Party, is on the right side of the economic argument.

"The world has confidence has confidence in the plans we've set out," he said.

In a reference to Mr Miliband's support from the unions, the Chancellor added: "The national interest or vested interests? I know which side we're on."

He also promised to give priority to spending that supports growth in the economy, with investment in transport schemes, medical research and communications networks.

The pledge follows a warning from Justice Secretary and last Tory chancellor Ken Clarke that the UK economy could yet fall back into recession.

Mr Osborne will deliver his much-anticipated Comprehensive Spending Review on October 20 and his speech is one of the big set-piece events in Birmingham, where the Conservatives have gathered as a party in power for the first time in 14 years.

[SeanMacGabhann]

as cuts go, that seems fairer than many

[DJKillaQueen]

I agree but why wait until 2013?

What frustrates me is that cuts to the poorest will come right away.....next year in fact.....so that's reform to JSA even though the government has no answer at present to the ratio of 5 unmeployed for every job vacancy (and like previous governments no real answer to LTU).....in turn adding to those on JSA by taking people of Incap from this month onwards in fact.....and yet those with a decent household income won't see their benefits cut until 2013!!!!!

I am thinking they are assuming the economy will have recovered enough by then so as not to alienate potential Conservative voters a year before the general election. After all how many unemployed are potential conservative voters......?

And for all the waffle about fairness, if we are that broke as a country, then these cuts should come right away.....instead everything is being staggered so as not to harm the backbone of conservative support until as late as necessary...whilst at the time giving the impression that the government are somehow being fair by making everyone sacrifce something.

A Labour government would do the same of course (protect it's own interests with it's voters) which is why so many of us regards politicians as full of, well you know what. Fairness and equality are not words that many of them truly understand let alone have any genuine interest in pursuing beyond furthering their own careers.

[silverfox]

Part of the problem with the raft of cuts to come is that they have to be fair. This one isn't fair.

While it is fair to say anyone earning over ?44,000 probably doesn't need this universal benefit it is unfair if the 40% tax earner is the single bread winner while two basic rate tax payers who have a combined income of at least ?44,000 still qualify for the benefit, especially as the lower rate earners will actually have more combined net income than the 40% tax payer.

Edited for spelling

[Jeremy]

Of course this will stick in the throat for a lot of people who feel they're being "punsihed", but the important thing is that the benefit will still go to the families who need it most. I'm not sure why the chief executive of "Child Poverty Action Group" feels it necessary to comment on people earning over 44k.

As for the wait until 2013... I don't think it's some sort of cynical vote-winning tactic. If that's what they were aiming for, I don't think they'd leave it until closer to the next election.

Edited to say - I agree with silverfox, in that it would make more sense if total household income was considered instead of the highest earner.

[Huguenot]

I was just a bit confused about that part as well. IDS said it would be resolved when the single benefit payment was phased in, so that there was greater visibility.

This implys that the separation between joint and individual household income isn't being phased in just because it's not practical, rather than that it's not policy.

Someone else then commented that this was often the only money that the 'mother' got to control - does this mean that child benefit is only paid to mothers?

So then, if this is about visibility and mothers, is this then being income linked only for working mothers in the 44k market, and the father's income isn't checked?

I just can't work it out, that's all.

[Marmora Man]

Seems fair to me - and, although I loathe the word - progressive.

If you are elegible for higher rate tax then a ?1,000 a year "bung" from gov't seems inappropriate.

Longer term it reduces the crazy circulation of our money in the "I pay taxes to the gov't for it to return some of it to me, less the inevitable transaction costs of the process" way.

If/when IDS consolidation of the tax and benefits system comes into place many of the anomalies will be ironed out with a gradual reduction of child benefit as total household income grows.

[DJKillaQueen]

Child benefit is paid to the biological mother at the moment (except in the case of a single parent/ guardian being otherwise) but it will be means tested on 'joint' household income, whether that other partner is male or female/ biological or step parent.

[louisiana]

Marmora Man Wrote:

-------------------------------------------------------

> Seems fair to me - and, although I loathe the word

> - progressive.

>

> If you are elegible for higher rate tax then a

> ?1,000 a year "bung" from gov't seems

> inappropriate.

>

Particularly when people earning just ?7,000, ?8,000 or ?9,000 a year are contributing to that "bung" with a marginal tax rate of 31% (20% basic + 11% NI) and - if they are single - no entitlement to benefits. In other words, people are being taxed on incomes that are insufficient for living on (particularly in London) while those earning many times more are in receipt of non-means-tested benefits.

I hope the LibDems manage to achieve a 10k income tax threshold, equivalent to what many other parts of Europe have had for many years. It does strike me as iniquitous to be taxing people who are barely scraping a living.

[Loz]

You want to see the squealing over at the Guardian. One writer, with five children, was complaining that his near-on ?4K of child benefit was a terribly important part of his higher-rate tax-paying income.

Benefits should be a safety net, not a bloody bouncy castle.

[DJKillaQueen]

Well it looks as though child tax credits will be removed at the some lower threshold too in the coming review so that'll also upset the apple cart.

[James Barber]

The changes to Child Benefit affect the 15% richest households and as someone wrote poorer households help pay for it. I can see argument about dual income families indiviually close to the threshold but jointly over it still recieiving this benefit - but suspect they'd have higher childcare costs.

So overall a sensible change to cope with dire financial circumstances that ensures the poorest in our society still get help. I don't get the delay unless its timed to coincide with 10,000 tax allowance.

[silverfox]

I understand Mumsnet is up in arms over this change with many stay at home mums while the children are young now saying that with childcare costs there's no point in them going back to work.

This hasn't been thought through and I can't see this actually happening in its present form. It doesn't bode well for the rest of the cuts to be announced.

[peckhamboy]

To be perfectly honest, childcare costs in London mean that for a lot of women it's probably not worth going back to work anyway, regardless of child benefit. I imagine your gross salary has to be pretty close to the 40% threshold before net salary outstrips childcare costs (not taking into account childcare vouchers etc) so I doubt that CB would make a real difference for most. Of course, there will be some who are hit harder than others but that's inevitable.

The irony is that a lot of people now up in arms over losing their precious child benefit are probably the same ones who complain that benefits are too widespread...

[mockney piers]

Child benefit is a drop in the ocean compared to child care costs. Having spent 6 months taking care of my child whilst mum worked I can certainly say that some sort of paternity benefit would have been welcomed as I'm now so poor that I have no choice but to go back to work and pay for child care costs, universal child benefit or no.

I'm hoping that the Tories don't overturn that piece of progressive (oooh sorry MM) legislation due to come into force next year as a soft win for themselves as I was rather hoping to do it again with child number two one day.

[Marmora Man]

MP - you know my concerns about that P word we debated it here a few months back.

[PeckhamRose]

This does not directly affect me but I do see it is mighty unfair that two people who are a couple withe a child who earn just under ?40,000 each still will get it, whilst one person single parent over ?40,000 will not. We are taxed separately but when we want something back we are judged as a couple. Another example is free prescription certificates for people who only work a little. I am taxed separately and earned so little I did not have to pay tax but when I ask for a free prescriptions form they judge me and my out of work hubbie as a couple and I am not entitled! They can't have it both ways, oh - but they do!

However, I really feel sorry for a lot of families and single parents especially who are going to lose a lot of money for this, even though I think child benefit should not be given to 'the rich', they have screwed up how it is to be allocated as the main example demonstrates.

[Loz]

The problem is, PR, how do you apply it simply and fairly? Every system has it's quirks and loopholes. Look at the right royal mess the tax credit system has become.

[david_carnell]

Child benefit should be universal. Rich or poor. Whether you need it or not.

Why? Because, simply. benefits only for the poor are poor benefits. Without the involvement of all of society, the welfare state is seen only as US-style safety net for the lowest groups in society. Without the "sharp elbowed middle-classes" campaigning, these benefits that were fought so hard for, are easily lost.

As someone else has mentioned, this is the state's way of saying "we recognise being a parent is hard and that you are responsible for the future of this country, so here's a little help". And that should be lauded. Instead, we moan that a tiny percentage of people earning massive salaries (compared to the UK median), mainly in London, don't need it and that this will make some big difference to the national debt if it's abolished. It won't. It's a trojan horse, to test the waters....before they charge through, tearing up the welfare state piece by piece. And if people don't stand their ground now, and say no, we can blame no one but ourselves when the whole system comes tumbling down.

[mockney piers]

spot on mr carnell. As one of the sundays said (the papers, not the band) its the same old tory mantra dressed up as necessity.

[SeanMacGabhann]

There is also the cost of how to patrol the policy. Another benefit of universal allowances is the much lower admin costs

But on the other hand whilst I obviously agree with Messers Carnell and Mockney, unless you are going to oppose every cut, this seems like one to let go

[david_carnell]

I would suggest targeting the far larger issues of VAT carousel fraud and avoidance of corporation tax before settling on applying the thumbscrews to those in receipt of benefits.

But then they aren't "soft" targets.

[Loz]

I would suggest targeting the far larger issues of VAT carousel fraud and avoidance of corporation tax before settling on applying the thumbscrews to those in receipt of benefits.

Nor are they easy targets. Not at all.

If carousel fraud could be bought down, it would. It costs governments across the EU billions each year and is run by criminals.

Avoidance of corporation tax would take rewriting the corporation tax law. I believe the current guide runs to over 10,000 pages. That's due to government after government tweaking laws. Make taxes simple. You create less loopholes.

As someone else has mentioned, this is the state's way of saying "we recognise being a parent is hard and that you are responsible for the future of this country, so here's a little help".

I'm sorry but I have never believed in this self-congratulatory 'my kids are the future of this country' b'locks. People have kids because that is the lifestyle choice they have made. Yes, some will grow up to be the next doctors/nurses/bus drivers but that's a) a side effect and b) not always - in fact rarely - the case. Where do you think the next generation of burglars are coming from?

Kids get free schooling, subsidised bus fares. free meals. I'm fine with all that - states should provide services, not cash. But, no, you want a few grand on top. Because it is 'a nice thing to do'??? Anything else you'd like? Gold plated cutlery all round? Handouts are for the poor and the needy, not because it's a 'nice' thing to do. That applies double in the current financial state we're in. Personally, I'd means test child benefit at a much lower rate and limit it to two children.

All the middle class whining in the papers in the last couple of days has really annoyed me. Can't cut benefits, can't cut arts budgets, can't cut medical research budgets... the list of the self-interested goes on and on. All of them saying "we do need cuts - but nothing that affects me, please".

I don't much like Cameron and Gideon, but if they've got the cojones to see this through then all credit to him. Sadly, they already look like they are starting to waver.

[Jeremy]

David, are you saying that all benefits should be available to everybody? Including, for example, housing benefit?

[mockney piers]

Bloody self interested middle classes, damn them, damn them to hell.