Clegg hint on child benefit changes

From PoliticsHome:

Nick Clegg indicated this morning the Government was ready to back down new rules on child benefit.

Speaking to BBC News this morning, the Deputy Prime Minister acknowledged there were “anomalies” with two lower-rate payers still able to receive the benefit, and that was “the kind of thing that we’ve always said we’re prepared to look at”.

Chancellor George Osborne is expected to reveal in his forthcoming Budget that the cut-off threshold for receiving the payment will start at £50,000, rather than the £42,475 originally planned.

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  • Im not sure i get it.

    Are they saying the cut off point will be £50k per household
    If one parent earns £50k or more?

  • Malcolm Todd 5th Mar '12 - 1:08pm

    This really is beginning to look like Osborne’s 10p rate moment. Somebody had a bright idea for a nice simple cut that would be popular with everyone. (Some bushy-tailed adviser had probably been at one of those parties where some high-flying higher rate taxpayer loudly questions why they get a state benefit and declares they shouldn’t be entitled to it — said Mr Bushy didn’t realise the loudmouth in question assumed that he’d get as much back in a tax cut as he was losing in the benefit…) Turns out it’s all horribly complicated and they’re going to make it pointlessly more complicated in a doomed attempt to save the idea and face.
    Of course, there’s a more cynical interpretation: the obvious answer will be to introduce a household income threshold, with a tapered withdrawal … this can then be merged with dear old family tax credits, and whittled away along with them. Presto! Universal child benefit is no longe — it has been completely replaced by means-tested family allowances. Perhaps a straight ‘child tax allowance’ will be reintroduced … for married couples anyway. 🙁

  • I am publishing a CentreForum research note on this tomorrow morning –

  • Our 2005 manifesto promised to abolish means-testing, because it creates anomalies and somewhere where it really cuts in there is a poverty trap which means that work doesn’t pay.

    Means-tested benefits are popular with the Labservatives because they polarise the electorate into Tory-voting haves (no benefits) and Labour-voting have nots (on benefits). So why are we playing along with them and destroying our own voter base?

    This whole episode just goes to show that whatever level you set it at, means-testing doesn’t work because it still creates 100% marginal penalty zones or even higher sometimes.

    Why can’t we be honest and use progressive and proportionate taxes on the better off to pay for child benefit? It’s not ‘wasteful’ to have universal benefits because the rich pay more for them anyway.

  • I never understood why this anomaly arose in the first place, given that we already have a two layer tax system: layer 1 personal taxation (ie. PAYE/Self-Assessment) and layer 2 family taxation (ie. WTC and CTC) which combines layer 1 tax returns of a couple to determine the amount of tax credits they as a family unit are entitled to. So it makes sense to use the (pre-existing) tax credits system to administer Child Benefits.

    Otherwise the simple (and better solution) is to just leave Child Benefit as a universal benefit. Remember the money the government claims to be lossing through a universal benefit is illusory – it is just repaying money that it shouldn’t of collected i nthe first place.

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