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Child benefit u-turn ahoy!

Ed Balls is attacking the Chancellor on child benefit cuts partly because he knows it is a policy th

By Rafael Behr Published 04 March 2012 10:41

Ed Balls has written an article for the PoliticsHome website previewing Labour's lines of attack on the government ahead of the Budget. Alongside the usual complaints that not enough is being done to boost jobs and growth, there is a new specific emphasis on cuts that, according to the Shadow Chancellor, represent a "bombshell" for families.

On Monday Labour will use an Opposition Day debate in the House of Commons to repeat our demand a plan for jobs and growth in next month's Budget. And we will call on the Chancellor to think again on changes to tax credits and child benefit which will cost families with children up to £4,000 per year.

Labour knows this is a weak spot for the government. The cuts Balls identifies are particularly ill thought through and he knows it. Tax credits were raided in a panic late last year to find extra money to pay for a back-to-work scheme for young people that was hastily cobbled together when it became clear that youth unemployment was becoming a political problem. Child benefit cuts for higher rate tax payers were announced ahead of the 2010 Conservative party conference partly as a tactical gambit by the Chancellor to demonstrate that he had the courage to raid his own party's supporters' pockets for the deficit reduction programme - thereby proving to everyone else that "we're all in it together."

The problem, as more and more people are noticing, is that the cuts are unworkable. James Forsyth reports in today's Mail on Sunday how anxious George Osborne and David Cameron are about child benefit in particular. The chief problem is that two-income households in which each earner is just below the higher rate threshold keep their benefit, while a single-income household just above the line gets hit. Yet the former family is much better off. Desperate compromises are being debated in Downing Street.

A shadow cabinet minister recently complained to me that Labour have not pressed the government enough on this issue, leaving it to Tory backbenchers to demand changes. "There's clearly going to be a u-turn on child benefit cuts," I was told. "Why aren't we lining up to get the credit for it?" Well now they are.

Tags: Conservatives  Labour

 
 

10 comments

Mr Danger's picture

Mon, 2012-03-05 07:22 — Mr Danger

This is and has always been Labour's 'growth strategy': borrowing money and handing it out to people.

Acamar's picture

Mon, 2012-03-05 08:34 — Acamar (not verified)

@Mrs ... universality is right, always has been the best system. But it is a joke to think the rich will give away their money. Tax, run properly (not voluntary as is is now, for the rich) is the solution.

frances smith's picture

Mon, 2012-03-05 11:01 — frances smith (not verified)

i read in the telegraph that osborne was thinking of create a higher threshold for withdrawal of child benefit, at around £50,000, which sounds a bit complicated to me.

i can't help wondering if implementation of this change might not cost more than is saved, especially if people start doing clever things like taking a small pay cut, or receive payment in a different form, because with the increase in tax on additional income to 40% and the loss of child benefit the advantages of earning more are completely removed.

isn't this the sort of disincentive to improving ourselves that the tory party used to accuse the labour party of doing?

they really are incompetent. must be poor maths skills, maybe we need a campaign to improve them within our political class. they are, after all, very fond of complaining that the rest of us can't add up.

RSD's picture

Mon, 2012-03-05 12:20 — RSD (not verified)

The child benefit cap is unenforceable, it was a political jesture but the fact is there is no family level national insurance number system that would allow the government to identify if the child benefit claimants partner is a higher rate tax payer, so effectively it could only be enforced against a family where both partners are higher rate earners.

Also it is a cliff edge, e.g. if you earn around £42k then a slight increase in gross salary reduces your net salary significantly.

Basically a bad policy, as has been said in Parliament lately, the government could raise £2bn by subjecting non-UK passport holders to the same capital gains that British people face. At the moment there is actually a financial disincentive to be a UK passport holder in the UK which has to be ridiculous.

Graeme's picture

Sun, 2012-03-04 12:03 — Graeme (not verified)

These are well off people. The poor losing much more can go hang. But of course they don't vote Tory.

test's picture

Sun, 2012-03-04 14:40 — test (not verified)

"There's clearly going to be a u-turn on child benefit cuts," I was told. "Why aren't we lining up to get the credit for it?" Well now they are.

So never mind doing what's right, how can Labour best manoeuvre for a cheap PR coup. It's perfectly right that people earning £44k a year shouldn't get child benefit on the 'take tax with one hand, give back benefits with the other' merry-go-round. They may be the "squeezed middle" that Miliband blathers on about but where I come from £44k a year is a bloody fortune.

Eddy S's picture

Sun, 2012-03-04 15:19 — Eddy S (not verified)

sounds a bit pointless requesting something that will change anyway.

the more fundamental point is that we should fight on principal that the govt is not there for the sake of expensive administration.

it should be there to hand out to those on actual need when necessary.

we should not hand out money to higher rate tax payers instead we should look to increase the tax free threshold to 15k for ALL that would help the squeezed middle and take lower income groups out of tax altogether.

while were at it balls should stop the free travel for older people who are higher rate tax payers too.

i'm not surprised by balls cynical politics we need to get rid of him and bring in chuka.

Fraziel1's picture

Sun, 2012-03-04 15:57 — Fraziel1

They should not reverse it. If you pay high rate income tax you should not be getting any benefits.

matthew fox's picture

Sun, 2012-03-04 16:57 — matthew fox (not verified)

Another u-turn, that what happens when you make policy on the hoof.

Mrs.Josephine Hyde-Hartley's picture

Sun, 2012-03-04 23:21 — Mrs.Josephine Hyde-Hartley (not verified)

It seems to me if the significant other members of Parliament don't stand up for the principle of universality, it may well be true "we're all in it together." - if it's true those in power want to get rid of the idea of universality as a normal, incredibly simple and efficient and unconditional way to make sure everyone gets treated the same.

In my view these reforms aren't radical enough - though not because they deprive only the wealthy of universal benefits - benefits that don't require any silly annual form filling fest..

The stopping of benefits to the children of the wealthy isn't in my view even worth of being called a reform at all.

Surely there can be no justifiable reform in depriving some but not all ordinary members of the public of this single most important facet of decent welfare provision ie universality.

Better to fix things so the wealthy can stand up and be counted as public heroes - should they be so kind as to encourage their children to donate any unwanted benefits to eg a charity concern of their choice.

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