The child benefit reforms are a disaster waiting to happen

Osborne has underestimated the perverse incentives that removing the benefit from higher earners will create.

Starting next week, child benefit will gradually be withdrawn from over a million families with the aim of saving the government around £1.3bn a year. But the new system is complex to understand, difficult to administer and costly to implement. After U-turns and climb downs, the government has ended up with a dog’s breakfast.

From Monday, all families claiming child benefit, where one partner earns over £50,000, will have one per cent of their child benefit withdrawn for every additional £100 of income they earn up to the threshold of £60,000, at which point the benefit is completely withdrawn. Although the government has softened its original stance on child benefit withdrawal, it will still affect roughly 1.1 million families.

By complicating what is a very simple benefit, as reflected by its high take-up rate (97 per cent), this reform is set to create all sorts of perverse incentives. The Chancellor will effectively increase the marginal tax rate for families where one person earns between £50,000 and £60,000. The rate of child benefit is £20.30 a week (or £1,056 a year) for the first child, and £13.40 a week (£697 a year) for each additional child. Based on these figures the marginal tax rate for an individual earning over £50,000 with one child will be 52.6 per cent, rather than 42 per cent. But in the extreme case, a person with six children and earnings over £50,000 will face a staggering marginal tax rate of 87.4 per cent. This translates into a net income gain of just 12.6 pence for every pound earned.

Given these high marginal tax rates, the Chancellor may have underestimated the impact this change will have on work incentives. For people with children who earn between £50,000 and £60,000, there may be little incentive to seek promotion, as any increase in their earnings will erode their child benefit entitlement. The benefit withdrawal will also seem unfair to some households. Two people in one household who both earn under £50,000, but together earn, say, £80,000 will not lose any child benefit, while a family with a single earner on £60,000 will lose it all.

The Chancellor may also have overestimated the savings that this move will bring. One logical response for someone facing a very high marginal tax rate due to the withdrawal of child benefit would be to increase their contributions to their pension. If enough people diverting earnings towards their pension pot, it could dramatically reduce the amount the government saves.

Rather than making complex changes to child benefit, the government would do better to conduct a more fundamental review of its support for families. There is evidence to suggest that spending on services for families instead of benefits is more effective in reducing child poverty. The government could extend its freeze on child benefit and use the savings to fund affordable childcare. This would avoid complicated reforms, cliff edges and perverse work incentives. Providing quality universal childcare should be a national strategic priority for public service and welfare reform, particularly as the cost of childcare largely influences parental decisions on whether work pays.

If the government is genuinely committed to welfare reform, then affordable childcare, rather than fiddly means testing, would offer the best help to struggling families.

Amna Silim is a researcher at IPPR

Chancellor George Osborne leaves Number 11 Downing Street. Photograph: Getty Images.
Chris Hondros/Getty Images
Show Hide image

Low fat, full fat: why the diet industry keeps changing its mind

A new report illustrates just how disillusioned the diet industry has become, at the expense of everyone else.

Another year, another wave of dietary fads. Most seem to surface in the summer, when new nutritional advice claims to provide the panacea to everyone’s health woes: “Eat clean get lean!” “The simple secret of intermittent fasting!” “The paleo way is the only way!” “Six weeks to a super you!”

However, despite the barrage of diet books, the expansion of nutrition research and the growth of education about healthy living, global obesity has more than doubled since 1980.

It may be that this is due to the conflicting information constantly issued from the diet industry. “Eat lots of protein – it’ll speed up your metabolism!” “Too much protein will damage your kidneys – reduce your protein intake!” “Superfoods are a vital source of antioxidants!” “Superfoods aren’t so super at all!” “Don’t snack it will make you pile on the pounds!” “You should snack – it’ll stop you from binge eating!” It’s no wonder people aren’t sure what to eat.

The UK launched its first dietary guidelines in 1994, which have since been continuously revised to form the guide now known as “The Eatwell Plate”. The dietary guidelines recommend plentiful carbohydrates “such as rice, bread, pasta and potatoes”, at least five portions of fruits and vegetables, some protein, some milk, some dairy and minimal saturated fat.

However, a recent report serves to highlight the confusion consumers face when it comes to food: it claims that the official advice on low-fat diets is outright wrong, even damaging.

Led by the National Obesity Forum and the Public Health Collaboration, the report (not peer-reviewed, it’s worth noting) attacked a host of official health proposals. It claims that “eating fat does not make you fat”, and criticises Eatwell Plate’s small fat allowance. The report also stated that saturated fats have been unfairly demonised, as there is allegedly little evidence to suggest that they cause heart disease. Meanwhile sugar consumption should be dialled down to zero, apparently, and calories shouldn’t be counted, as an abundance of them won’t cause obesity. Also, forget about the exercise - apparently a bad diet can’t be outrun, according to the report.

Professor David Haslam, chairman of the National Obesity Forum, said: “As a clinician, treating patients all day every day, I quickly realised that guidelines from on high, suggesting high-carbohydrate, low-fat diets were the universal panacea, were deeply flawed. Current efforts have failed – the proof being that obesity levels are higher than they have ever been, and show no chance of reducing despite the best efforts of government and scientists.”

Dr Aseem Malhotra, consultant cardiologist and founding member of the Public Health Collaboration reinforced this by saying the guidelines were “perhaps the biggest mistake in modern medical history, resulting in devastating consequences for public health.” Under current dietary guidelines, obesity levels have indeed increased in the UK, with nearly two-thirds of men and women overweight or obese, costing the economy more than £3bn per year.

In the face of such starkly opposed sides - both backed by seemingly reputable experts who claim all their research is based on empirical evidence - what are consumers meant to do?

The vilification of fat

In 1983, it was recommended that overall dietary fat consumption should make up only 30 per cent of total daily energy intake – 10 per cent of which, at most, should come from saturated fat.

The recommendations came from a number of research papers published at the time, which suggested a link between saturated fat intake and increased levels of LDL cholesterol – the cholesterol which has been connected to increased risk of heart disease, stroke and atherosclerosis.

An even simpler reason for the suggestions boiled down to this: fat has more calories per gram than carbohydrates – nine calories per gram versus four, to be exact. This shape to future official guidelines, and gave birth to the low-fat high-carbohydrate mantra. Fat was cemented as public enemy number one.

As a result, the fat eliminated from people’s diets was to be supplemented with an increased intake of carbohydrates. Tipping the scales in favour of carbohydrates were promises of weight loss as a result of higher fibre content, elevated levels of serotonin to aid sleep and boosts in mood from feeling fuller.

But obesity levels continued to soar, and health experts shifted their focus to the next culprit: carbs.

The low-carb era

An analysis by The American Journal of Clinical Nutrition combined the results of 21 studies and found that “saturated fat was not associated with an increased risk of coronary heart disease”. Other studies demonstrated the positive effect on testosterone levels in men from increased saturated fat intake, and have noted increased levels of triglycerides (the stuff that makes you fat) from lower fat diets.

As a result, dieticians developed a deep suspicion of carbs, and sugar in particular, and diets like the Atkins regime became more and more popular.

In part, the report by the National Obesity Forum and Public Health Collaboration uses the research that propped up these low-carb high-fat diets as a means by which to attack the general consensus surrounding healthy eating. Dr Malhotra, who led the latest report, previously worked in a pressure group called Action on Sugar – a group that has tried to get the food industry to reduce the amount of sugar added to food.

The reasoning goes something like this: guidelines encouraging greater carbohydrate consumption are oblivious to the fact that sugars constitute a vast amount of refined carbohydrates. By cranking up the sugar intake we ratchet up the risk of type 2 diabetes; this in turn could spark further health problems including obesity.

The logic seems sound, and yet obesity levels have continued to soar in the face of this research. The notion that all sugar should be avoided also ignores the fact that our brains require a significant amount of glucose for optimal functioning.

Everything in moderation

In the face of an industry that can’t make up its mind about how people should eat, it’s no wonder obesity levels have grown to epidemic proportions. So what can be done?

Professor Susan Jebb, the government’s obesity adviser, believes that the current debate needs to expand beyond the battle between carbohydrates and fat. She said: “We’re eating too many calories – if we want to tackle obesity people do need to eat fewer calories and that means less fat and less sugar.” And she’s right. If decades of research have pointed to anything assertively, it’s that calories count, and paying attention to portion sizes could take us a long way.

Both fat and carbohydrates are necessary for our bodies to function. The solution? Enjoy everything in moderation. Eat fruits without fearing fructose, don’t throw away the egg yolk, get a decent amount of protein and yes, you should have your slice of cake too.