Government policy on higher-rate taxpayers and child benefit

Christopher Chope MP calls for the government policy on higher-rate taxpayers and child benefit to be "abandoned".

The purpose of the debate is to use the force of argument to put further pressure on the government to abandon its policy of taking child benefit away from children who have a parent who is a higher-rate taxpayer.

There are relatively few political issues on which, over the generations, there has been cross-party consensus. But one is support for the principle of a universal, non-taxable cash payment for families with children. That is now known as child benefit, introduced initially in 1977. Child benefit replaced child tax allowances dating back to 1909, and family allowances introduced following the Beveridge Report in 1946.

Beveridge regarded a universal system of children’s allowances as a fundamental plank of the welfare state, providing ‘help to parents in meeting their responsibilities’, and as an ‘acceptance of new responsibilities by the community’.

When child benefit was introduced by the Labour government, it enjoyed all-party support. Indeed, its introduction proceeded despite the desperate financial crisis at that time in 1976/77, when the country was under the cosh of the IMF which was, effectively, running the Treasury. No politician argued then, as the Chancellor of the Exchequer did on 20th October 2010, that “the debts of the last Labour government, and the need to ensure that the better-off in society also make a fair contribution, makes removal of child benefit for families with a higher-rate taxpayer, ‘unavoidable’”.

To emphasise just how far the government is now proposing to go to destroy the previous consensus, it is worth noting that the Child Poverty Action Group supports universal child benefit, on the ground that ‘those with children have higher costs than those without, and they need additional support at whatever level of income they live on’. So did Margaret Thatcher’s government, describing child benefit as ‘simple, well understood and popular’. Indeed, it has a take up rate of over 97 per cent.

There was no hint at the last general election that Conservative policy was going to change. Indeed, the prime minister, as leader of the opposition, boasted that he wanted, ‘the next government to be the most family-friendly government we’ve ever had in this country’. At a public meeting in Bolton on 5th March 2010, he said that he ‘wouldn’t change child benefit’, doubtless having taken a leaf out of the then shadow xhancellor’s book, who told the Conservative Party Conference on 6th October 2009 that ‘we will preserve child benefit…’

The early decisions of the coalition government announced in the June 2010 Budget were consistent with these promises. In his Budget speech of 22nd June (HC debates 22 June 2010, C173), the chancellor said, “We have decided to freeze child benefit for the next three years. This is a tough decision but I believe that it strikes the right balance between keeping intact this popular universal benefit while ensuring that everyone across the income scale makes a contribution to helping our country reduce its debts.”

In the debate I hope to challenge the government as to why we are still faced with the prospect of a policy which was never part of any manifesto and which has been attacked from all sides as fundamentally wrong in principle and in practice grossly unfair, as well as complicated and expensive to administer and vulnerable to widespread ‘non-compliance’, to adopt the language of the Institute of Fiscal Studies.

The government’s policy is a direct assault upon 1.5 million hardworking families, the very families for whom government support has hitherto been constant. Among the most hard-working are those 60,000 single-parent families where the lone parent works such long hours in a demanding job as to earn over £43,000 a year, thereby qualifying as a higher-rate taxpayer and a victim of this policy. These families also often have very high childcare costs.

In the league table of hardworking families, they are closely followed by two-parent families where the breadwinner supports a spouse who cannot work, whether because of disability, long-term sickness or the need to support a child who is disabled or sick.

It was such a family in the last category, living in the Christchurch constituency, which came to my constituency surgery in autumn 2010 and first impressed upon me the utter folly of what the government is proposing.

The government is targeting families like these to make a greater contribution to reducing the deficit, while exempting families with earnings of up to £84,000 per annum spread equally between both parents. Of the 1.5 million families from whom child benefit is to be taken away, very few contain two higher-rate taxpayers. Almost all, therefore, will or may be in a weaker position to bear such a loss of benefit as those two-person-earning households with over £80,000.

Finally, let us remember that hardworking families are already contributing to the deficit reduction by suffering a restriction on the application of tax credits and through the freezing of child benefit. This last policy alone will save about £1bn in 2013/14.

is MP for Christchurch and has been on the Political and Constitutional Reform Select Committee since 2010.