The value of Child Benefit has been frozen until 2013, cutting family incomes in tough times. The Government has also announced plans to stop paying Child Benefit to higher rate tax payers, ending almost 35 years of universal support for children. We all agree that the wealthiest should bear the greatest burden when the nation has to reduce the deficit and strengthen the economy. But taking child benefit away from better off families is not a fair way of doing it.
A lot of the anger in reaction to the proposal is around the unfairness of the threshold. Families with only one earner in the higher income tax bracket will lose child benefit, whereas families with two earners just below the threshold will not - even though the family with two earners may in total be tens of thousands of pounds better off each year. While this aspect is deeply unfair, there is nothing ‘fair’ about taking child benefit away from any families.
Raising a happy, healthy child costs parents on average £210,000 by the age of 21, but benefits all of society. The tax and benefit system should recognise these extra costs that all families with children bear. Simply cutting child benefit means that wealthy households without children do not carry their fair share of the burden; around 70% of higher rate tax payers do not have children in their households, so are not affected by the plans. Is it really fair for the Treasury to increase the burden only on wealthy households with children and to leave out other wealthy households? All households with the means - those who have the broadest shoulders - should be helping to share the burden in these tough financial times.
The British tax and benefit system has recognised the cost of raising children for over 200 years. Families with children face higher costs than families without children, and it is right that the tax and benefit system recognises this. It is also right - even for higher rate taxpayers - that they should have the support of a universal benefit that means they have extra money when they are raising children. This is balanced by the higher tax they pay later in life when their children have left home, their costs are lower and their salary is likely to be higher. This makes life easier for any family and it is a system that pays for itself in a fair and progressive way. It’s a system that works, has worked for decades, and was affordable even when Britain's economy was far smaller than now.
Part of the reason child benefit replaced a child tax allowance in the 1970s was because research shows that when the main carer (usually the mother) receives the money rather than the main earner, it is much more likely to be spent on children’s needs. Even with wealthy households it is important to make sure that children’s needs are not neglected while money is spent on other things.
The plans could mean genuine hardship for families, especially in London and the South East. Many families just above the threshold will have high monthly payments on their mortgage. The more children they have, the more rooms they are likely to have in the house and the higher their mortgage payments are likely to be. For those not far above the threshold, the cut is equivalent to raising income tax by around 5% for two children families, and by about a further 2% for each additional child in a family. This is thousands of pounds per year, so there will be many families who find that, after paying their mortgage and losing their child benefit, the remaining household budget will leave them struggling to meet all their basic costs such as bills, food, clothes, transport and childcare.
The Prime Minster, David Cameron, promised to make Britain the most family friendly country in Europe. The only EU country that does not give some form of support for all children is Italy, which also has one of the highest child poverty rates in Europe. Do we really want to join them and stand apart from the other EU countries who provide support for every child? The Prime Minster should stick to his 'family friendly' promise. There are better ways to cut the deficit, so it's time for the government to get fair and get family friendly.
