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.