Budget 2012: Families spared child benefit cliff-edge

FAMILIES fearing the loss of child benefit have been offered some relief by the Chancellor after he pushed up the cut-off point to £60,000.

Under the new system, 90 per cent of families will continue to be eligible for some child benefit. Those where both parents earn up to £50,000 will keep the full entitlement and only when an earner brings home more than £60,000 will they lose out completely.

The government had previously threatened to scrap child benefit for any household where a parent earned more than £42,475, but George Osborne yesterday watered down the changes in the face of intense criticism, including from Conservative backbenchers.

Hide Ad
Hide Ad

Critics had pointed out that a mother and father earning £40,000 each would have kept their payments, while a single parent on £43,000 would have lost out under the old proposals.

Instead, child benefit will now only be completely withdrawn when someone in the family earns £60,000 and tapered off after £50,000 to avoid a “cliff edge”.

Campaign groups said the new measures were “better” but still unwelcome. They will spell the end of the universal system of child benefit laid out by the architect of the welfare state, William Beveridge, in 1942.

And there were warnings last night that the system could be costly and complicated to administer, potentially wiping out the savings from the scheme.

Treasury sources acknowledged that the new system will not avoid the anomaly that a couple with a combined income of £98,000, where both earn £49,000, will still get full child benefit, whereas a family with a single earner bringing home £61,000 will get nothing.

Mr Osborne said in his Budget speech: “In the spending review, we took the difficult decision to remove child benefit from families with a higher rate taxpayer.

“I said then that I simply could not justify asking those earning £15,000 or £30,000 to go on paying child benefit to those earning £80,000 or £100,000. And I stand by that principle.”

But he said he wanted “to do this in a way that is fair”, avoiding a “cliff-edge that means people lose all their child benefit when they earn just a pound more”.

Hide Ad
Hide Ad

Alison Garnham, chief executive of Child Poverty Action Group, said: “This is better, as it hits fewer families, but it’s still not good.

“Rather than facing a cliff edge, family budgets of those affected now face being thrown down a flight of stairs, as child benefit is tapered away.”

She added: “The new proposals will mean that families with children lose less, but they will still lose out from this budget.”

She warned that the “new clawback will be complicated and costly to administer”.

The Chancellor said he had ruled out means-testing child benefit, but tax experts said the new regime could be as complicated.

“Proving eligibility, or a claim for child benefit, where earnings fluctuate above £50,000 will be a chore for many and may cost more to administer than it is worth,” said Frank Nash, a senior tax partner at chartered accountants Blick Rothenberg.

Child benefit is currently paid to all households with children at a rate of £20.30 a week, or £1,055.60 a year for the oldest child, and £13.40 a week, or £696.80 a year, for each younger sibling.

Yesterday’s changes will be implemented from January 2013.

Anne Longfield, chief executive of family charity 4Children, said: “One speech has wiped away a principle held over 35 years of recognising the importance of children in every British family.”

Related topics: