Budget 2012

Child Benefit: Some families still lose out despite welfare climbdown

 

The threat of losing all child benefit payments was lifted from 750,000 families where at least one parent earns between £42,500 and £60,000.

George Osborne had initially proposed removing the benefit entirely from households with at least one earner on that higher rate of income tax, which currently stands at just over £42,000.

But he has modified his plans after Tory MPs led a chorus of protests that the moves would unfairly hit the "squeezed middle" – some of whom are Conservative voters.

The benefit is worth some £1,000 a year to parents with one child, £1,700 for two children and £2,500 for three children.

The Chancellor announced yesterday that households without an earner on a salary of more than £50,000 would retain all their money, while those with an earner on between £50,000 and £60,000 will keep some of the cash.

Mr Osborne's concessions took the heat out of the political storm over his original announcement 18 months ago. Even David Cameron had acknowledged that there were problems with them in their original form.

But anomalies remain within his revised proposals. A family with one earner on £60,500 will lose all of the previously universal benefit, while another in which both parents take home £49,000 will still receive the money.

The Treasury said that setting up a system to avoid the "cliff-edge" problem of a family losing all its benefit when a parent earned a pound over £60,000 would have involved setting up a complex bureaucracy. It said 85 per cent of families would continue to receive all the benefit and another 5 per cent would get some of it.

The £1.5bn cost over the next three years of changing the plans will be met by lowering the threshold for the 40p tax band down from £42,476 to £41,450, bringing up to 300,000 employees into the higher-rate tax.

Mr Osborne told MPs he stood by the principle that all sections of society had to make a contribution to paying down the deficit, but said he wanted to find a fair way of trimming the child benefit bill.

Alison Garnham, chief executive of the Child Poverty Action Group, said: "The Chancellor has taken a step in the right direction, showing he has listened to our campaigning, but the new claw-back will be complicated and costly to administer."

Case study: 'I have to drive every day for work so a fuel duty rise is disappointing'

Jeff Romeo is a PR consultant. When The Independent spoke to him after last year's Budget, he was planning a move out of London and was hoping to see the Chancellor deliver on his promise to crackdown on tax avoiders. He now lives in Sevenoaks, Kent, with his wife, Romanee and their children John, four, and Lilla, two.

 

"We bought a car when we moved out of London and now I'm in a situation where I need to drive everyday for work, so fuel duty going up in this Budget is extremely disappointing.

"I like to get myself worked up over Budgets, but ultimately this one was fiscally neutral – take a bit here give a bit here. It already feels as if the Lib Dems and Tories are fighting the next election. It seems a budget for the Coalition rather than the people.

"I'm pleased they're still talking about abolishing loopholes, but they say that every time.

"One thing we do welcome is transparency in showing people where tax is going. People will value that. I've been considering setting up a small business. With a cut in corporation tax there is a real incentive for me to do that."

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