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Tuesday, 16 November 2010

The child that benefits should need it.

Everytime I find myself wondering about universal benefits, I think of the wonderful support staff at my school, many of whom work on far lower wages than I ever have, and yet are funding the child benefit  of multi-millionaires. Is this really what William Beveridge envisaged all those years ago as what the welfare state was for? I sincerely doubt it. Did he also imagine the UK would find itself over a trillion pounds in debt? Unlikely. So we can't keep harking back to what the welfare state was created to do, the country has changed. And so, surely, must benefits.

It was fascinating to watch the new leadership of the Labour Party take the bait and fall into the trap of 'over-opposition' - where they simply oppose in a knee-jerk fashion every policy the coalition come up with. Are they, the party that calls itself the progressive option, really going to justify taking money from the public purse to give child benefit to hedge fund managers? Oh yes they were. Thankfully, it may well be that opposing every cut was just a 'holding position' and now they have their shadow cabinet together we have Douglas Alexander, with the work and pensions brief, tentatively supporting Iain Duncan-Smith's welfare reform.

But back to benefits. The idea is that from 2013 those households with one person earning the higher rate of tax (at the moment this means they earn £44,000) will not receive child benefit. There is a lot to commend in this idea, but the devil will be in its' implementation.

The main argument against it was that a couple earning £43,000 each (£86,000) would not lose their child benefit (£33 a week for 2 children) but if one person earns £44,000 they would. This seemed not to make sense at first and was highlighted as 'unfair'.

But if you think about it, a couple who are both earning £43,000 a year are most likely to both be working for a reason, but are not likely to be very "rich". These couples - who would therefore have their children in full-time childcare - which is expensive - cannot be very numerous, and also there is an argument that the government would like them both to be working as productive members of society as it helps with employment numbers.

But if you have a couple where one earns over £44,000 and the other doesn't you have a large net in which you can catch the couples consisting of one who earns hundreds of thousands, if not millions, and the other who doesn't have to work as their partner earns so much. They should not be receiving child benefit, and this way they won't. So in that way it can be seen to be a progressive policy.

When I say the devil is in the implementation, I mean that the current way child benefit is collected and administered means it is not possible to automatically stop paying it. It is paid to the mother of the child, (allegedly because the father wouldn't be trusted to spend it on the child instead of drink) and the mother does not have to tell the father they are getting it. This led to an amusing discussion on air between Radio DJ Chris Evans and his wife when the news broke which was the first time he found out she actually got child benefit.

Anyway, the only way child benefit won't be paid is if someone in the household earns over £44,000, which could be found out by the Inland Revenue through PAYE if you work full-time, or your self-assessment if you are self-employed. But if it's the man who earns over £44,000 they would have to say whether their partner receives child benefit (even if you are married you have separate tax arrangements obviously) and a man could justfiably say "I don't know" then get out of paying it. They can't legally be forced to ask their wife.

Additionally, should the mother of the children earn below the threshold they might be asked whether their partner earns over £44,000, but tax affairs are private, for data protection reasons if nothing else. So the mother could say they don't know and that's that.

David Cameron suggested that the British public could be trusted to tell the truth but how far they'll go to tell the truth, given it penalises them a considerable amount of money remains to be seen.

I have no doubt we need to do something about the transfer of money from someone earning £10,000 a year to someone earning £10,000 a day. By 2013 hopefully they'll work out what to do. Meanwhile, coffee shops must prepare for a drop in machiatto sales, ballet classes might have slightly less demand, and Gymboree may have to reconsider it's entire business model.

Next stop should be Winter Fuel payments and free London transport passes for FTSE Chief-Executives and retired barristers. Oh no, wait a minute, they are old, and they vote in their droves.................

1 comment:

  1. I'm sympathetic to the arguments on means-testing child benefit, but the most successful and durable welfare state will always contain a strong element of universality. Its biggest beneficiaries (for free healthcare, free education etc.) have always been the middle classes, and that's the only way to build a long-term consensus for sustaining it.

    As both Beveridge and Labour understood at the time, the welfare state is not a charity. Paying for benefits that go to the rich is inefficient from a charitable perspective, but that's not the sole point of doing it.