Monday, 7 January 2013

Child Benefit - Should It Be Scrapped?

Tax credit leaflet

According to the Guardian 4.6 million women, who receive child tax credit directly, will be affected by the reforms to child benefit.  In addition, low-paid new mothers on £12.000 a year are losing £1.300 during pregnancy and the baby's first year via cuts to maternity pay, pregnancy support and tax credits.  Also they are losing a further £422 from cuts to child benefit over the same period.

The above figures were complied by the Commons library for the shadow equalities minister, Yvette Cooper, who intends to highlight the plight of women in the debate this coming week.

Apart from the complexities of the new system (where application has to be made not to receive child benefit), is child benefit necessary today?

Child benefit (or family allowance as it was called then) was first introduced the year I was born - 1946 - to give non-working mothers money when the wage-earning man of the house couldn't be relied upon to hand over enough for the needs of the family. The allowance was paid to all children with the exception of the eldest.  In those days many women had to give up work when they became pregnant
and in the past 66 years for millions of women - and indirectly children -the money was a life line.

In 2003 the then Labour government introduced Child Tax Credit in an attempt to reduce child poverty.  This tax credit can be paid to the employed and unemployed. All families with children and a combined income of up to £58,000 a year (or up to £66,000 a year if you have a children under 1 year old) can claim.  The basic amount is up to £545 a year but extra 'elements' are paid - if a child is disabled is an example.

Why does government have two systems which provide financial support for children (albeit through a parent/parents)?

David Cameron has said he didn't want every family with children to undergo means testing, but surely child tax credit is exactly that.

Wouldn't it be much fairer to scrap Child Benefit and promote Child Tax Credit for all families with children?  That way the necessity for those who earn over a specific sum to complete tax returns to opt out of Child Benefit would be eradicated and HMRC would have more time on their hands to perfect our basic tax calculations?

If David Cameron's proposal for working families to be able to claim up to £2,000 per child every year from their tax bills to cover the cost of childminders and nurseries comes to fruition, then surely Child Benefit must be consigned to the dustbin.


Mark Wadsworth said...


Child Benefit (universal, flat rate, costs next to nothing to administer, barely any fraud or error, until now non-means tested) and which is worth £12 billion a year is an infinitely better way of doing things that Child Tax Credits (savagely means tested, riddled with fraud and error etc) which is worth £23 billion a year.

As far as I'm concerned, scrap Child Tax Credits and double or treble Child Benefit.

Elby the Beserk said...

There was also a child tax allowance. My ex and I timed things brilliantly, starting our family around the time that the tax allowance was junked, child benefit was to all intents and purposes frozen for years, and we suffered mortgage interest rates of c15%. Similarly, tax credits for working families with kids came way to late.

The family, the true building block of a strong society, has been under attack in the UK for over 30 years now. And look where it has got us.

Child Benefit is perhaps the easiest way of supporting families. And I have no doubt that the cost of dealing with its new complexities will be more than the savings. 'Twas ever thus. Tax credits are a shambles.

pa_broon74 said...

Have to agree.

I have no kids, but tax credits was always going to be a mess.

I think this move is a calculated one for the attention of the masses. On the surface, removing money from the rich sounds fine but its never that straight forward.

We have had a microcosm of it up here with prescription charges and the council tax freeze. Ok, the rich benefit from it, but so do the less well off, scrapping it for a newspaper headline benefits no one in the longer term.

subrosa said...

I actually agree with you Mark, but I don't think the wooley liberals would like that. They don't think 'comfortable' families should have anything.

subrosa said...

Tax credits are a way of making society completely dependant upon the state Elby.

As Mark says child benefit to everyone is perhaps the answer, although it maybe it should be limited to the first two children. Increase the rate to what is given to the eldest at the moment for both.

subrosa said...

Pa_broon, I get scunnered with the lefties thinking that taking more money from the 'well off' is the answer to utopia. These are the very people who pay the majority of taxes.

SadButMadLad said...

Yep, child benefit and tax credits for children should both be abolished. If you can't afford to have children, then don't have them.

They don't exist for the benefit of children. Sure some children do benefit 'cause their parents spend the money (or offset it) on stuff for the child (school books, clothes, etc). But for many others it's just another pot of money to spent for the whole family. Whilst true that in a libertarian sense I shouldn't care what the families spend it on, but if you're going to try and benefit some group of people at least do it properly rather than for political purposes.

The only reason they exist is to keep people hooked on them like a drug. Once addicted to the payments, it's nigh on impossible to wean parents off them. So any party that wants to abolish them will not get any votes from families.

So they will never be scrapped.

Highland Cooncil said...

Hi Subs,

I had a vasectomany many years ago which put paid to the child benefits I could have enjoyed.

In my ongoing quest for the prefect wee wuman please mention that fact.

No chance of progeny.

Yer pal, Dave

subrosa said...

Good point SadButMadLad but unfortunately now benefits for children are the norm and parents expect them.

I 'off-set' mine but then I'm perhaps the last generation who thinks ahead. Have to admit I always felt it wasn't right that other taxpayers contributed to my family, although I never rejected them.

Yes, we've become a benefit-dependant society. How sad.

subrosa said...

Dave, I suspect my female readers will make note of your comment in their wee red books. :)

Bucko The Moose said...

As you say above, tax credits are there to make people dependant on the state.

We're talking about ways of taking as much tax as possible, wasting most of it and giving a bit back to people with kids.

I prefer this option: Stop wasting money. Reduce everyones taxes to a much fairer amount, say 10% of the paypacket rather than the current 73%

That way, everyone will have more money to spend on whatever they choose. Those who want kids can spend it on their kids, those who don't can spend it on something else (Like a mint condition Ford Capri)

SadButMadLad said...

Now you're talking. Ford Capri was my first car.

Bucko The Moose said...

Mine fell apart faster than I could weld it :-(

CrazyDaisy said...


I have given ours up. We don't need it. I have supported all 3 of my little darlings thus far from my own wages & expect to do so until they are fully grown...I have noted that I pay more into the system than I receive. The Govt will not like my self employed attitude when I withhold my taxes, not as a taxpayer but as a sovereign human being. I'm looking fwd to their reaction & my remedy.

Capt Ranty is a fine fellow ;)


Crinkly & Ragged Arsed Philosophers said...

Is the government taking the 'pro' out of creation?

Just a thought, given the amount of times they roll the baby boomer mantra out of their rhetorical armoury.

Or is it just another excuse for their failure to keep the nation productive and earning?

subrosa said...

Sensible idea Bucko, but there is a problem. There are thousands - perhaps over a million - people who are not employed and are parents. They don't pay tax and they would lose out badly.

Therein lies the result of decades of social engineering.

subrosa said...

Mine was an old Austin A35. Cost me £90 and went on fire after I managed to get to Somerset.

subrosa said...

Good for you CD and my admiration. I used mine.

Ah, your progress will be interesting. :)

subrosa said...

I suggest another excuse Crinkly and another slight of hand to make the system even more complex.

Bucko The Moose said...

Subrosa - As I see it, unemployed people would not be affected as they would be on benefits. They would not loose out by not getting to keep more of the tax they don't pay.

And the tax and spend could be gradually reduced over time to undo the damage

subrosa said...

I suppose that could work with a fair amount of tweaking Bucko.

Mark Wadsworth said...

"I actually agree with you Mark, but I don't think the wooley liberals would like that. They don't think 'comfortable' families should have anything."

Thanks, and yes, the envious and the do-gooders tend to get in the way of sensible policy. Of course, 'comfortable families' are still not getting anything because in net terms there is a still a transfer of money from taxpaying comfortables to lower and non-earners, that's a maths and logic thing.

By all means, we can restrict our New Improved flat rate child benefit to the first two or three children, separate topic (it has to do with evening out the mothers-versus-everybody else pay gap; if you have more than three children, the additional downwards effect on your pay is minimal).

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