Tuesday, October 05, 2010

Why is it so difficult to base Child Benefit on household income?

Surely, in this day and age, even the simplest database is capable of linking two National Insurance numbers together, doing a wee sum to work out whether the amount of tax they pay means they earn a salary greater than or equal to a particular sum, say £44k, but it could be more, and telling them whether they are eligible for Child Benefit or not? Then all you do is send that information to the Child Benefit people who feed it into their database which is also based on NI numbers.

The reason for the Government leaving a massively unfair loophole in their proposals for Child Benefit - that a household with one higher rate taxpayer earning £44,000 with a stay at home parent will lose Child Benefit while two lower rate taxpayers earning nearly £90,000 will get to keep it, is, apparently, that the costs of means testing will be prohibitive? How can that be the case when my local supermarket is capable of fine tuning its marketing to me, sending me vouchers for the stuff I buy most every 3 months?

There is no point in even trying to pretend that the Government's proposals are fair in their current form. I can't understand why it is so prohibitive in terms of cost to work it out on household income. Sure, there's an argument that the family with two earners will have child care costs, and those are significant while their kids are under 5, but they don't cost £45,000 a year.

I still think that there are strong arguments for universality of Child Benefit. Having said that, if we're in a situation where there is no money left, as Liam Byrne, the former Labour Chief Secretary to the Treasury, so wryly put it, and we have to make cuts, it's surely preferable they hit households who were financially more able to sustain it. Under Labour the poorest people were those on just above the threshold for working tax credit, around £17k. Those families know the true meaning of the word struggle and need help, which measures like the Liberal Democrat policy of raising the tax threshold is delivering. A household on £44k is much more able to cope with a measure like this. The restriction of Child Benefit to higher rate taxpayers at least avoids hitting the poorest hardest. I doubt that anyone on such an income is going to struggle to keep their family warm, fed, clothed and sheltered if they lose their Child Benefit.

I was quite concerned by the stories over the weekend that they were going to age limit Child Benefit to 16 - and there have been some reports that it would be as low as 13. That would have had a severe impact on the poorest families and would have been, to me, completely unacceptable.

I don't like this Child Benefit measure, and I want them to think again about how it could be linked to household income, because it is unfair in its current form, but it is right in principle to take from those most able to cope with the loss. For too long the poorest have borne the brunt of our tax system. That has to change.


Anonymous said...

Tax is based on individual income. The hypothetical families being discussed here already pay vastly different amount of income tax, yet nobody is complaining about the unfairness of that.

If you favour basing CB on household income, do you also favour a flat rate on income tax which would mean tax also tracks household income?

Hywel said...

"Surely, in this day and age, even the simplest database is capable of linking two National Insurance numbers together,"

Probably - but we have individual not joint taxation (In part because of the complexity of recognising partnership/relationships).

A couple with a single earner earning £80,000 pay about £6k more income tax/NI than a household with a joint income of £80k made up by two people earning £40k each.

Anonymous said...

"Surely, in this day and age, even the simplest database is capable of linking two National Insurance numbers together,"

I would have thought that the issue was for starters about linking people at the same address.

Given all the recent problems regarding people being issued with wrong tax codes I suspect the Revenue are doing a lot of trawling through their data looking for possible errors (if not then they b----y well should be) - they might as well trawl for multiple taxpayers at the same address as well.

Neil M said...

Surely it must be possible to look at the income that the people responsible for each child have and work out on that basis whether the child (notionally) qualifies. This should also include the income of any divorced parent who is paying maintenance for the child.

Welfare benefits are there to make sure that the most vulnerable in society do not fall below an acceptable minimum level of income not as a perk for the well-to-do middle classes. This is a benefit that frankly should have been reformed long ago.

Neil M said...

From the media coverage I think it is fair to expect that by the time this gets to parliament they will have found some way around this problem.

Bloody stupid mess to have got themselves into in the first place and an even more daft attempt to find a way out of it.

I can't but help to think the civil service are in some way to blame.


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