I have received lots of emails and letters about the proposed changes to Child Benefit.
I should declare an interest at the outset - as a higher rate taxpayer whose wife has stopped work to look after our three children I am personally affected by this proposal.
Given the difficult decisions that the Government is going to have to take on other welfare payments in order to tackle the huge deficit Gordon Brown has left us with (at the moment, the Government is having to borrow £1 in every £4 it spends - that’s £155,000,000,000 of debt this year alone), I believe that in principle the Chancellor is right to say that the better off shouldn’t receive Child Benefit.
As always, however, the devil is in the detail. His proposal defines the better off as any household containing a higher rate taxpayer. There are two problems with this.
Firstly, people on incomes just over the higher rate threshold (£43,875 in 2010/11 assuming you are under the age of 65 and earn less than £100,000), particularly those living in London where living costs are higher, might be relatively better off but they are not rich. This is a consequence of Gordon Brown’s repeated decision not to increase the higher rate threshold in line with the rate of inflation, which led to more and more people becoming higher rate taxpayers.
Secondly and more importantly, this definition is not based on household income. This means that a family where both parents work but neither is a higher rate taxpayer would still get Child Benefit despite having a combined income of as much as £86,000 but a single parent on a salary of £44,000, or a family where one parent is on a salary of £44,000 but the other parent stays at home to look after the kids, wouldn’t. That can’t be fair.
David Cameron has rightly said that this proposal must be viewed alongside the Coalition Government’s other policies and has highlighted the proposed transferable tax allowance for married couples. This may indeed address the unfairness referred to above in relation to married couples but it won’t help cohabiting couples or single parents.
In summary then I support the proposals in principle but have real concerns about the detail, which I have already raised with the Prime Minister’s office. I will be forwarding examples of some of many letters and emails that I have received to him.
Finally, many of the people who have contacted me make the point that the Government should not be punishing hard working people but doing something about those who could work but choose to live off the hard work of others. I can assure them that the Government is doing that - see, for example, this week’s announcement that no family should receive more in benefits than the average weekly take home pay - but that on its own will not deal with the mess we have inherited. Everyone is going to have to pay a bit more and get a bit less but it must be done fairly.