Child benefit – a better way of sharing the cost

Figures given in reply to a Parliamentary Question on 15 November offer a much simpler and much fairer alternative to the Government’s widely criticised plan to withdraw child benefit from higher rate taxpayers. The Chancellor of the Exchequer, George Osborne, presenting the Comprehensive Spending Review on 20 October, had said: “I simply cannot ask those earning just £15,000 or £30,000 a year to go on paying the child benefit of those earning £50,000 or £100,000 a year.” But the solution proposed by the Government is plainly unfair. Abolishing child benefit for the higher paid automatically places the whole burden of the cut on families with children. Childless taxpayers with similar incomes will not lose a penny.
Paul Flynn, the Labour MP for Newport West, therefore asked the Chancellor what increase in the higher rate of tax would be needed to cover the cost of child benefit payable to higher rate taxpayers. The answer was that the cost in 2010-11 is £2.0 billion and the higher tax rate would have to rise by “around 2 per cent” to cover this cost. All those earning £44,000 or more would pay an extra 2p on every pound of additional income, but the burden would fall equally on those with and without children. And none of it would fall on those earning £15,000 or £30,000.
Moreover, the much criticised unfairness of the Government’s proposals to families with two medium-income earners would be avoided, as would the enormous administrative complications involved in discriminating between families just above and just below the higher-rate threshold.
It’s not too late for the Government to see sense, adopt the sane solution and retain the universality of child benefit.

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