Child Benefit 40% Tax Policy in Trouble

The government’s plan to withdraw child benefit from households in which one or more taxpayers pay 40% income tax is in serious trouble.

I have just come from a parliamentary debate in which Christopher Chope, MP for Christchurch, exposed a whole series of problems with the policy to which the minister, David Gauke MP, had few if any answers. The government line is simply not convincing, one suspects because the policy was drawn up in a rush before our 2010 Conference without being properly thought through.

More seriously still from the government’s perspective, it is not clear that it has a majority in Parliament for the policy. The LibDems, of course, love the idea, but Labour appears set to oppose it, having somewhat opportunistically deemed the households affected to belong to Ed Miliband’s rather elastic “squeezed middle”.

Meanwhile, a very significant number of Conservative backbenchers have concerns and, in many cases, these are sufficiently serious that I would expect them to be expressed in the voting lobbies.

The policy is particularly toxic for colleagues who want to see the government do more to promote marriage and the traditional family, given the lack of movement so far on the government’s promise to recognise marriage in the tax system. However, the policy is also objectionable for those who want the tax system to be neutral between personal choices, since it clobbers single earner householders, most usually with a stay-at-home Mum, relative to dual-earner couples.

Ministers cannot answer colleagues who question them about the sheer unfairness of one family with a single earner on £45,000 losing their child benefit, while a family with two earners, each earning around £40,000, get to keep their child benefit. Certainly, I don’t feel that I am currently able to give constituents a satisfactory answer as to how this is fair, particularly when we continue to pay child benefit to many thousands of children in EU countries such as Poland and Lithuania, where costs are much lower, even when they have never set foot in the UK.

Given the four figure sums involved, the equivalent of £4,000 of marginal gross income for a family with three children, it is no surprise that many people have contacted their MP on this issue. I have had several dozen constituents raise it with me, but another MP says that he has been contacted by over a thousand people. Adding to the weight of such representations is the fact that, at least in my case, they do not appear to be part of an orchestrated campaign.

Colleagues had expected the Treasury to come forward with proposals to mitigate the unfairness of the policy, but now it is suggested that this would be too complicated and difficult, given the implications of household means testing for independent taxation.

If so, the Treasury would be well advised to use the Budget to drop this policy. The alternative may be that it is defeated on the floor of the House.


9 responses to “Child Benefit 40% Tax Policy in Trouble

  1. “… when we continue to pay child benefit to many thousands of children in EU countries such as Poland and Lithuania, where costs are much lower, even when they have never set foot in the UK…”

    I’d like to suggest that the answer to the problem might be to stop the above practice. The money the Government is seeking to save through reducing Child Benefit payments, will be saved in this way (or some of it). Not only that, it may remove one incentive to come to the UK. This will also free up jobs.

  2. Mark. As usual you are bang on target here and clearly an MP with a feel for the popular mood. The arguments for imposing yet more hardship on single earner nuclear families just don’t stack up. Please vote against the proposals to remove universal child benefit in the interests of natural justice. And/or let me use my wife’s personal tax allowance against my income.

  3. Roll Child Benefit in to Universal Credit so it is withdrawn progressively upto an income of around £44,000.

    Job done.

  4. Announcing this policy on the hoof at a party conference was a terrible mistake. It clearly had not been thought through. What a totally unnecessary blunder. It should be completely withdrawn particularly now the latest borrowing figures show the Chancellor may have a little wriggle room. Osborne can perhaps use the argument that the deficit reduction plan has turned out to be more successful than anticipated so far and allows him to withdraw the planned withdrawal of child benefit. People are being financially squeezed enough without adding more austerity of this kind. Tories claim to be pro family but at the same time withdraw child benefit from a particular group of people. It totally undermines credibility.

  5. Well done Mark, hit the target again. I get the feeling that you’re sliding further down the Cameron and Clegg Christmas card lists.
    The policy as it stands would be farcical if it weren’t so cruel. I also agree with annisik51 and would go one step further in ceasing overseas aid to India and Pakistan.

  6. Mark, you are entirely correct. If implemented, this policy will give the UK one of the most anti-family taxation policies in the EU. By attacking an obviously sensible universal benefit, it will also help to destroy any semblance of support for the welfare state when the lower middle classes in particular realise that they are just a milch cow. I confidently expect the Cabinet multimillionaires to announce next that they are means-testing the state pension (which is low anyway).

  7. Pingback: Weekly Round up 24/02/2012 « North East Child Poverty

  8. Child allowance needs pegging to the eldest two children only (if it is to be retained at all?). A fairer system is surely substantially increasing tax allowance and throw in the amount spent administering child allowances.
    Children are expensive and a lifetime commitment, hardly a right to be subsidised. Naturally it falls on us all to see that our children are properly looked after, but surely society can expect parents to (jointly) fulfill thier obligations, and deliver their side of the bargain?

  9. I dont know if my wife claims child benefit. My wife doesnt know if I am a higher rate taxpayer. We dont have to tell each other and we wont. so what will happen?

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