Osborne: no child-benefit reprieve for middle-classes

George Osborne has insisted he will go ahead with controversial plans to axe child benefit for higher-rate taxpayers.

The Chancellor said it was only “fair” that the better-off made a contribution towards paying down Britain’s record debts.

He indicated, however, that ministers would look at the way the plans are implemented when the changes come into effect next year.

His intervention came after David Cameron sparked speculation of a major rethink yesterday when he acknowledged the potential “unfairness” on some families just above the 40 per cent tax threshold who stood to lose thousands of pounds.

Another senior government minister, Culture Secretary Jeremy Hunt, also said that ministers were looking at ways to improve the plan and make it “fairer”.

However, Mr Osborne – who unveiled the changes at the 2010 Conservative Party conference – insisted that he stood by the principle behind the plan.

“We are very clear that it is fair that those who are better off in our society make a contribution to the saving of money we need to make to pay down the debts, so we will be removing child benefit from higher rate taxpayers,” he said.

“We haven’t set out how we are going to implement that and we are going to do that in the next few months, but the principle that it is not fair to ask someone who is earning say £20,000 or £25,000 to pay for someone who is on £80,000 or £100,000 to get child benefit is one that I think is very important.”

Under Mr Osborne’s plan, a couple with three children could lose around £2,500 if one parent earns just a few pounds over the 40 per cent tax threshold of around £43,000 a year, even if the other is unemployed.

However another couple, where both parents each earn just under £43,000 and enjoy a total household income of more than £80,000, would keep all their benefit.

In an interview with Parliament’s The House magazine, Mr Cameron accepted that was seen as unfair by some people and that the changes would create a “cliff-edge” effect for some. “Some people say that’s the unfairness of it, that you lose the child benefit if you have a higher-rate taxpayer in the family (but) two people below the level keep the benefit,” he said. “So, there’s a threshold, a cliff-edge issue. We always said we would look at the steepness of the curve, we always said we would look at the way it’s implemented and that remains the case. But again, I don’t want to impinge on the Chancellor’s Budget.”

His comments were echoed by Mr Hunt, who said: “We are looking at ways to make it fairer. We just want to look at the fairness issue there and see if there’s anything we can do to improve it.”

Downing Street, however, stressed the change would go ahead and Mr Cameron had not changed his mind on the issue.

A No 10 spokeswoman said: “He is still very clear that top end earners should pay their fair share of tax. There is still some time before it is going to be implemented. These are matters for the Chancellor.”