CPAG Guest Post: Save Child Benefit

For over 100 years the British tax and benefit system has recognised the costs of raising children. Families with children, whatever their income, have higher costs than families who do not have children. Since 1977, these costs have been recognised in the tax and benefit system through universal Child Benefit (CB) payments. However this is set to change in 2013, when Child Benefit will be taxed back from families with a higher rate tax payer. While the announcements in the budget – which were widely tipped to fix the problem – were a step in the right direction, they by no means fixed the problem. In fact, they missed the point entirely.

When Child benefit payments stop being universal next year, the UK will join Italy as only the second developed country that does not recognise the costs of children in the tax and benefit system. Families with children have higher costs than those without children – regardless of the household earnings. The question of fairness should not be if a household earning £50,000 needs CB or not, it should be a question of fairness between households earning £50,000 who cover the costs of raising happy, healthy children, and those earning £50,000 who do not.

When the claw-back was announced as a back of an envelope idea at the 2010 Conservative Party Conference, George Osborne declared that any household with a higher rate tax payer would lose CB. Without any clear vision of how this might work, it was suggested that all higher tax rate payers would have the entire value of their household’s CB added to their tax bill at the end of the year. Instead, under the announcements made in the budget, families with one earner taking home over £50,000pa will have 1% of their CB taxed back for every £100 they earn. Rather than being thrown down a cliff edge, families are being pushed down a flight of steps; the tax and benefit system will still cease recognising the costs of raising children.

Children are not a private luxury, and while it might sound clichéd, they quite literally are the future of our society. Child benefit plays a crucial role, it is the means through which society contributes to a small part of the costs of raising the next generation.

On top of this unfair claw-back, CB rates have been frozen for three years, which will see their value decline by over 10 percent in real terms. This cut will hit all families, including those with incomes too low to pay tax in the first place.

The Child Poverty Action Group researched what these two changes will mean to families across the income scale. We surveyed over 350 parents who spoke about dreading these changes, and having to cut back on necessities, like food and fuel, as well as missing out on important treats, like buying birthday presents or going camping. Some parents had already planned strategies on how to stretch family budgets even further, such as going without childcare or seeing relatives, but too many simply did not know how they were going to cut back. Parents felt that payments made for children, and spent on children, were being cut to deal with the deficit. No parent thought their child should pay for the financial crisis.

But importantly, the report (accessible by clicking here or on the image above) also highlighted how crucial Child Benefit payments were for family incomes, right across the income scale. We polled 650 parents and found that CB was spent overwhelmingly on meeting children’s needs (on items such as children’s clothing) or on household needs (like bills and mortgages). As Child benefit payments shrink or are taken away in 100 tiny cuts, so too will families ability to meet these needs.

Child Benefit needs to remain universal, to recognise costs of raising children that all families with children bear. Removing it from some families in tiny cuts to pay for the deficit is faulty logic. All wealthy households, including and especially those without children, should pay their fair share – this is done through progressive taxation, not a tax on Child Benefit. Child Benefit rates also need to be restored in line with inflation. With many families finding it harder to provide for their children, it makes no sense to cut payments that are spent on children.

Rys Farthing

Child Poverty Action Group

CPAG is the leading charity campaigning for the abolition of child poverty in the UK and for a better deal for low-income families and children.

Visit the CPAG website here

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One response to “CPAG Guest Post: Save Child Benefit

  • Stephen Crossley

    Many thanks to CPAG and, more specifically, Rys for providing this guest post for us. The report that is mentioned is well worth reading, if you haven’t already. As always, it is the quotes from parents themselves that are the most powerful. There are many in the report that make you realise how important child benefit is to many families, here is just one of them:

    ‘Child benefit helps me provide shoes for my children … correct fitting ones can cost £30 plus per child. It means my children have a winter coat…’

    CPAG have also just released a new guide to Universal Credit. It can be purchased here: http://www.cpag.org.uk/publications/ucguide

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