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11 January 2019

Amber Rudd has eased the pain of child benefit changes – for the government, at least

Although the unfairness of the policy remains, the political difficulty has been remedied. 

By Stephen Bush

Amber Rudd has announced an end to the two-child limit for child-related benefits – or, at least, that’s what most of the coverage says.

The reality is more complex: what Rudd has done is end the retroactive two-child limit, where households that already have more than two children had their benefit top-up taken away. But she has retained the limit for children yet unborn, and for when two families become one, for instance when a widowed man with two children marries a divorced woman with one (we call this a “blended family”).

It means that the policy’s unfairness, while eased, doesn’t go away. But it does mean that the political difficulty of defending the policy is eased, partly because the financial pain won’t be fully felt until the middle of the next decade, and partly because the unfairness of taking away benefits from children who are already born is unpopular, but the argument that ministers make – that people who are not in receipt of social security or in-work benefits cannot have unlimited numbers of children either – is popular, even though it doesn’t really add up.

Why doesn’t it? Well, because the restriction on when you can claim child tax credits kicks in at £55,000, well in excess of the average household income in the UK. Although the argument pitches an imagined “ordinary” family, that ordinary family earns much more than the national average.

The changed policy still creates unfairness, because most families with more than two children fit into three groups: families with chaotic lives at the bottom of the income distribution, families at the top of the income distribution who do not receive any form of in-work benefits, and so-called “blended families” right across the income distribution. A divorcee with one child who marries a widower with two cannot be fairly said to be “making a choice” to have more than two children. People with chaotic lifestyles don’t respond to the withdrawal of financial support – they just become more heavily indebted and have yet more chaotic lives.

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But the argument appeals, because no one believes that they claim benefits, and although £55,000 is in reality out of reach for most British workers, it doesn’t feel like an unimaginable sum of money for most people.

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More importantly, the vital parts of the Conservative coalition (the retired) and the part which went missing last time (people earning £45,000 and upwards that see the effects of austerity but are not affected by it) are particularly responsive to this argument. Why? Well because the retired obviously aren’t beneficiaries of child benefit, and people earning more than £45,000 are at or near the point where they don’t receive it either.

It has the same effect as most government policy since the Budget: direct transfers to the £45,000-£55,000 part of the income distribution, plus more funding for the bits of austerity that those voters are most likely to notice or be directly affected by. The big exception, of course, is the rise in rough sleeping: the most visible sign of a public realm in serious crisis and one that, as yet, the government has not yet managed to halt, let alone reverse.