Welcome to the New Statesman website. Please sign in or register to participate in the conversation.

The Staggers

The New Statesman’s rolling politics blog

Syndicate contentRSS

Osborne buries universal child benefit

The Tories' political gamble sets out a clear dividing line with Labour.

After last year's "age of austerity" message sent their poll ratings tumbling, the Tories were hoping to strike a more optimistic tone at this year's conference. But George Osborne's decision to bury the principle of universal child benefit means that all the talk is of cuts once more.

He announced this morning that child benefit would be axed for higher rate taxpayers from 2013, with no suggestion that it would be reinstated in the future - "I'm not planning to reverse this".

This means that all households in which at least one person earns £44,000 or more will lose out, although a family with two adults earning, say, £40,000 a year will not.

It's a big political gamble for the Tories and it amounts to an average tax increase of nearly £2,000 a year (£1,000 for the first child and £700 for each subsequent child) for the families affected.

As Sunder Katwala notes, the decision also jars with what many key Tories said during the election campaign. Here, for instance, is what Philip Hammond, then shadow chief secretary to the Treasury, told Newsnight on 27 April:

We have made a decision to rule out means testing child benefit because it is a universal benefit. Talking to people, one of the things they appreciate about child benefit that it is universal and easily understood. To start to means test it would erode it ... It reassures them about the availability of the benefit. If you start means testing it, if you start slicing away at that universality, then people are going to ask where you are going to stop.

Osborne's team respond by claiming that they haven't "means tested" child benefit, they've merely linked it to tax status. But to most voters that will look like a distinction without a difference.

The Tories' move also sets out a clear, and potentially defining, dividing line with Labour. Ed Miliband has been clearer than most in his defence of a universal welfare state, a position that is part politics - the need to retain middle-class support for state provision - and part principle - the state has an obligation to support families, regardless of their income.

As he told Andrew Marr recently:

I personally don't think we should reopen the issue of universal benefits ... I think that actually why do we give child benefit to families up and down this country? Because it's a recognition of the importance of family and the cost of children.

One should add, as all progessives know, that benefits for the poor tend to be poor benefits.

If Labour plays this right, it could easily scoop up support from the Tories' natural constituency. The political battle for the middle classes starts here.

Tags: George Osborne

32 comments

mount1's picture

'Graeme' couldn't put it better. Is 44k enough tho?

Jackie's picture

Its ridiculous so the benefit cheats can hsve as many babies as they like because their partners dont work so they will still get it how does that stop benefit cheats - I thought that was the idea? Just give it for the first 2 children and stop it when they get to 16. Then the people who "benefit" will stop shelling them out. Sorry if this upsets single mums who genuinely are single but I dont see why my daughters should go to work for nothing because their child benefit pays their childminder fees. Normal middle class families are hit here as usual.

Alison's picture

An additional point.

Withdrawing Child Benefit could damage women's entitlement to a basic state pension.

If you care for children at home, and get child benefit, your National Insurance contributions are maintained - which protect your basic state pension.

If your partner is earning £46k does that mean a woman's state pension is no longer protected?

The govt needs to answer that, and it's yet another instance of the burden of bailing out the banks falling on women.

How it works: http://bit.ly/cFkh0I

Bev's picture

I was surprised to hear Osborne's account of this on Today this morning. The idea that if a home has one income over £44k that home loses child benefit but if it has two incomes of £40k that family keeps it seems to fly in the face of ideas of fairness. His argument seemed to be that this made the process simple rather than complex. OK - but simplicity and fairness don't necessarily go hand in hand as this decision would seem to show.

Livers's picture

Another election promise gone. Someone should keep a list.

Robert Taggart's picture

Good on Gideon !
Now, what about reducing it to 20K ? + winter fuel allowance + free travel passes +... !

ang's picture

When this news broke today, my first thought was, that this is a spectacular own-goal for the tories. I have long believed that they don't know what they are doing, but this is so stupid. This will affect many ordinary hardworking people, who pay into the system. To lose £2000 per year is massive. This money is for the mother to spend on her children. It is another way of hitting women and children hardest. They have already frozen it for 2years, taking money from the poorest people. This lot are common thieves and are intent on dismantling the state because they see no need for it. They think they can just skip off into the sunset, hand in hand with the bankers and joe public will just lie down and accept it. Ed miliband needs to cease this opportunity and speak up for the people of this country before it's too late!

ang's picture

Robert Taggart. I was going to make a comment, but I decided not to waste my time.

DB's picture

Its about making serious decisions to solve very serious problems, many of them bequeathed by the last government.
Red Ed can look for dividing lines all he likes, but what would he cut instead?

Tom's picture

Is it going to be an all-or-nothing measure? If so, someone kids getting a pay rise that takes them into the higher pay bracket could end up considerably worse off thanks to it.

ang's picture

Spending reviews are not required of opposition parties. The tories never mention the global economic recession, I wonder why? I know, it's because they can't blame Labour for that, so just don't mention it and the stupid British public will never know. The tories are making the public pay for the bankers greed, but let's not upset the bankers eh!

mnc's picture

Can you pay more into a university pension to reduce your tax band? At present I do not pay AVC's but it could be worthwhile as it reduces your tax band. If the CB is based on tax bands this could be a way around the system.

Lou's picture

12 allusions to it all being Labour's fault in the first five minutes of his speech. Take away those blaming Labour bits and he'd have nothing to say.

Lou's picture

"You can't tackle the debt without tackling the unreformed welfare system"

No but you George can avoid tackling the bankers who bought this crisis about and you can avoid tackling the vast billions evaded in tax like a typical Bullingon club bully boy who believes only in jobs for the boys and robbing the poor to benefit the rich!

"No family should get more on benefit than the average family going out to work" What planet does he live on for goodness sake! I don't know any family on benefit who get more than the average family that work which according to ONS figures in 07 was £32,779 before tax.

Molly's picture

When Clegg was deemed a 'King Maker' I can think of another type of 'Maker'. It's still 4 letter word ends in t and begins with c... Yes, so pleased to have a Tory Gov back! Here we go, what's next to go... hopefully Cameron and Clegg. What STUPID STUPID assesement of who should get what... Well done everyone who voted Tory and Lib Dem. *claps hands*

Lou's picture

The various political commentators are saying that 24k is the average working family income. I still don't know of any average family claimants on 500 pounds a week including Housing Benefit, Council tax and Child benefit.

Osborne spends too much time reading the mail and believes that the exception is the norm.

Ayse Veli's picture

It's only Day 1 of the Tory Conference & they're already inflicting shock and awe tactics.

ang's picture

Re:Gideons speech. Not much there regarding the culprits in the crime, but the scapegoats featured quite alot. As Lou said, if it wasn't for Labour, he'd have nothing to say. It was actually Thatchers government that cultivated the reliance on the welfare state, by putting whole communities out of work in the 1980's, communities which have never recovered and here they go again!

The Old Man's picture

If someone is paying 40%+ income tax, how dumb is it to give them a welfare handout?

Anyone who does not believe that wefare dependency and its cost to the taxpayer should be reduced is not going to applaud Osborne for this change, but I do. He is wise to announce a welfare cut at the top before the rest of the package is revealed, and if he can start to chip at tax rates before this parliament ends he is playing a good political hand. Labour wants everyone to feel they benefit from welfare, let Osborne end that fantasy and Mr Ed will have a very tough cause to argue at the next election.

swatantra nandanwar's picture

Strangely enough I'm in favour of means testing, on the good old fashioned socialist principle of '... giving according to need'.
There are some better off families that don't need Child Benefit so its no point in giving them extra pocket money to spend on other than their children.
But I take the point that Child Benefit is somehow tied up with NI contributions to pensions and that needs to be sorted out.

C douglas's picture

As usual it is the working families (who probably only have one or two children) who get stuffed while those families that produce child after child with no income get the benefits. Why do I bother working and putting my child in daycare just so I can pay for some non-worker to see her children all day while I only get to see mine a couple of hours every night?

8910steven's picture

Hello there ;I` ve just arrived here from Mars and spent my first day here on Earth watching George Osborne`s speech at the Tory conference .There`s just one thing I need to clarify about you human beings ;when you bang the palms of your hands together like that is that meant to indicate that something really stupid has just been said ?

David Vinter's picture

Fact is if a Labour government had made these changes to child benefit, then NS would be asking for a new bank hoilday to celebrate!
As to those families who do lose, then tough, all this high income talk is all lost on those of us living north of St Albans, our real world is not one of £100 hairdos and bottles of Chateau Yquem. We grow veg in our garden not flowers, oh yes, and vote tory.

Peter L. Griffiths's picture

The child benefit should be tax free and renamed (possibly the housing benefit) and be gradually extended and paid to all adults in place of the personal tax allowance. As a housing benefit it could be applied in repayment of mortgages. This should encourage the banks to lend.

Nick's picture

Another ludicrous idea by Osborne and co. What on earth is the point in assessing this on the sole earnings of one person earning over the upper tax threshold rather than the aggregate of both? Child Benefit is directly linked to quite a few other entitlements such as Child/Working Tax Credits as well as used to determine who is parent with care in issues involving child maintenance and the cut off point between child dependancy and non-dependancy, not to mention the determination of when a child/young person becomes a student in their own right. The knock on effects have not been considered by the fool.

The self employed high bracket earners will simply shift declared earnings between one and the other to take advantage of the system.

I will wait and see how the hard pressed HMRC gets on with this one; given that they can't cope with what they have already got.

It's ill- conceived and completely lacks logic, more osbo rubbish! he is an utter incompetent.

Nick's picture

The HMRC Tax Credit Office (TCO)does not communicate with its Child Benefit counterpart. It will mean the Child Benefit unit will have to transfer functions to the TCO and then we have all the problems of claim delays, confusing claimant information & notifications, not to mention the question of which years earnings get used in the annual assessment. A fiasco in waiting!

A recipe for much fiddling of annual incomes, claimant error and the cost of updating tired worn out software systems within HMRC. It'll cost more than it saves.

William's picture

The reason for universal benefits are, usually, that it is more expensive to means test them. In fact it's almost always more expensive to means test, when you consider all the civil servants, office blocks, managment, and pension programes that means testing entails.

So I suppose that the stupid 44k earner thing is just a way round having to means test properly. It's easier to identify all the people in the country earning 44k a year and rule their children out, than it is to calculate the total income of every family in the country, which would require first working out what a family is: unemployed mum living with wage earing grandparents a family?, divorced but both contributing to children a family?, co-habiting un-wed adults a family?, civil-partners fostering a child a family? Once you've worked out who is part of the family you add all the incomes together then remove all the deductions and losses to find the total 'family income', and then you check with the inland revenue and the census to make sure nobody's fibbing (and remember they don't have any centralised computer system so it all has to be done by hand) in short a bureaucratic nightmare.

Saying "anyone with 44K+ in the house and you're out", looks crude, but I can see why they did it. Probably it was the only way to make means testing cheaper than just handing out the benefit, frankly considering the small numbers that will lose their 2000 pounds a year, I still think it's going to be more expensive in the long run.

Chris Baldwin's picture

This is a big issue. Labour must make a stand and promise to reverse this once we regain power.

Nick's picture

It's just osbo's pathetic attempt at looking as though he's hitting the high earners; this will be one of the most inneffective measures out. It will also potentially encourage more fraud as a single claimant (Child Benefit quite possibly being the only benefit received) will think twice about declaring if a partner moves in who is earning over the 44K threshold.

This group of claimants will see it wrong that the only thing they get out of the benefits system is being taken away. I hope they question who they vote for!

If osbo and his motley crew can't think this one through, how on earth can they be trusted to 'modernise' the whole of the benefits structure?

Graeme's picture

@C douglas - well, you should consider the welfare of your children. They need your time, more than anything else.

Map's picture

This government is so unfair it is the normal familes that work that will suffer they should take it away from the ones that cannot be bothered to work or the ones that are earning massive salarys. What else are they going to do in the next 5 years make the country worse than it already is.

Post new comment

By submitting this form, you accept the Mollom privacy policy.

Latest tweets