Monday, 4 October 2010

Child Benefit: just bloody means-test it

Quite a few people have responded in relatively positive terms to George Osborne's announcement today of a cut in Child Benefit. It has been a low-hanging fruit for government savings for decades, since it is possible to point to millionaires in receipt of government handouts they clearly don't need.

But it is a policy hamstrung by election promises not to introduce means testing to this sacred cow of post-war welfare - when in fact means testing is precisely what it needs. Instead, we have a dreadful fudge: any household with an earner who pays higher rate tax (meaning a salary of over £44.5k) will no longer be eligible.

The main unfairness in this is obvious - a single parent earning £45k will lose CB while two parents earning a combined income of up to £86k would still get the benefit. The same applies to a couple who have chosen to have one partner work and the other stay at home to look after children. It is grossly unfair.

Osborne acknowledges this, but says it is worth it to avoid the "complexity" of means testing. He's wrong. The facilities to means-test this benefit already exist for many other benefits. And if it's complexity he's worried about, why is he introducing a new tax clawback facility to enable this measure, when HMRC have long argued for clawbacks to be phased out, not more introduced, because of the complexities (and costs) they add to the tax system?

On the one hand, Osborne is hamstrung by pre-election promises not to touch child benefit. He clearly intends to deploy the "things are much worse than we thought" argument yet again to justify this volte-face. But he also seems to have calculated that proper means testing would be too much of a u-turn.

George, this is people's lives you're dealing with. Forget the political machinations and the face-saving. If you want to shave money of the Child Benefits bill, the only fair way to do it is means testing. Just bloody do it.

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