Government to go ahead with Child Benefit cut

The chancellor George Osborne has indicated that the government will go ahead with the proposed cut to Child Benefit for higher earners.

The changes were first suggested about a year ago and are expected to be brought in in 2013.

Any parent is currently eligible to claim for child benefit for each of their child and the current take up for this benefit is practically 100% of those eligible. However, the government has proposed to change the benefit rules and restrict those parents where at least one parent has earnings above the 40% tax threshold. This means that if either parent earns over £42,400 per year, they will no longer be eligible to claim.

Prime Minister David Cameron said that this potential ‘cliff edge’ effect for single income families would be looked at to see if a taper can be added, but indicated that he didn’t want to impinge on the chancellor’s budget.

The government indicated that they would be going ahead with the plan and the chancellor added that he still sands by the principles of it.

Child Benefit is currently worth £20.30 per week for the first born child in a family and £13.40 per week for each subsequent child. This could provide a family of four with with more than £1,750 of additional benefit income per year.

The plans have been criticised as potentially being unfair and hurting families with only one working parent the most. Other families could still be eligible with an income of over £80,000 per year if both parents have highly paid jobs that fall just under the threshold.

The government indicated that they were still looking into how the change will be implemented to make it fairer. They have ruled out means-testing as they say this would add too much to the costs of administering the benefit.

The government indicate that by bringing in these changes they could potentially save £1 billion per year. It is thought that the change could impact on around 1.2 million families.

George Osborne said : “We’re very clear that it is fair that those who are better off in our society make a contribution to the saving of money we need to make, so we will be removing child benefit from higher rate taxpayers.”
Mr Osborne went on to argue that it was not fair to ask those who earn around £20,000 to pay taxes to support benefit payments for those on over £80,000.

Labour argue that the plans are unfair and highly bureaucratic and will be causing huge anxiety to many families already struggling in the current economic climate. A spokesperson for the Child Poverty Action Group suggested that the plan should be scrapped in favour of a better system to make the wealthiest pay their fair share.

The debate over the Child Benefit proposals is likely to add to the wider debate over plans toreform a number of other benefits. Many have argued that the government’s proposals are hitting families the hardest.

The Chancellor indicated that further announcements over their Child Benefit proposals will follow in the coming months.