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4 October 2010

Osborne buries universal child benefit

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

By George Eaton

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.

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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.