IoS special report: Families hit by freeze in child benefit

Failure to match inflation will affect those on low and middle incomes

British families with two or more children will have lost more than £1,000 in child benefit by the end of 2015, according to the first comprehensive report of its kind. When Chancellor George Osborne announced a freeze and real-term reduction in child benefits, the spotlight turned on those earning more than £50,000; they will have their benefits withdrawn from next week.

But fresh analysis finds that middle- and lower-income families with two children will be more than £300 a year worse off in three years' time, as a result of their child benefits being frozen and suffering real-term cuts under the coalition. Critics say that the failure to keep benefits in line with top-rate inflation will throw the Government's pledge to protect people on lower incomes "completely into reverse".

Currently, 7.8 million households receive child benefit, getting £20.30 a week for their first child and £13.40 for each subsequent child. The payment, which is not means tested, will be frozen until 2014. After that, it will rise at 1 per cent, lower than the predicted level of inflation.

A family with one child will lose £650 in total in child benefits. A family with two children will lose more than £1,000, and a family with three children will lose more than £1,500 by 2016, found the new study, Child Benefit: A Bad Case of Neglect?, by the Trades Union Congress (TUC).

Donald Hirsch, the director of the Centre for Research in Social Policy at Loughborough University, said lower-income families will be hardest hit, because they will also face cuts to their tax credits. Some families could lose over £3,000 as a result of the Government's ongoing tax credit cuts, the TUC suggests.

"I think there is a real change in direction, away from giving full protection to the worse off," Mr Hirsch said. "Under the last government, benefit raised was used to try to tackle child poverty, and it was constantly increased faster than inflation, even faster than earnings. The idea was to try to get people to catch up in relative terms. The Government's commitment to protect people on lower incomes has completely gone into reverse."

The TUC's general secretary, Frances O'Grady, agreed that those on the lowest incomes will be worst affected. She said: "Cutting the value of benefits for families means those in greatest need will get less, with the poorest children suffering the most."

Child benefit has been frozen since 2011, and according to the Child Poverty Action Group, now covers only 20 per cent of the cost of a child for a couple and 18 per cent for a single parent. Fiona Weir, chief executive of the single-parent-family charity Gingerbread, said: "For many single parents, child benefit and tax credits are a lifeline. If the link between benefits and inflation is broken, the consequences will be devastating.

"It's single-parent families, whether in or out of work, who are being hit hardest. If the benefits uprating Bill is passed next month, we will see many more children pushed into poverty."

A Treasury spokesperson said changes to child benefits should not be looked at in isolation, adding that "measures announced at this Autumn Statement will mean working households are, on average, £125 a year better off next year". She said: "The Government is delivering child benefit reforms as simply and fairly as possible. Those with the broadest shoulders should carry the greatest burden, and 85 per cent of all families with children will continue to receive child benefit in full and see cash rises from April 2014."

Charities said the figures were a "cause for concern". Citing the fact that more than six million working families live in poverty, including two million children, Julia Unwin, chief executive of the Joseph Rowntree Foundation, said: "There is a serious risk that, after a decade of national debt, a growing number of people will face a decade of destitution."

From next month, child benefit will start to be withdrawn if a parent, or a partner cohabiting, earns more than £50,000. If one member earns more than £60,000, the benefit will be removed completely. Catherine McKinnell, Labour's shadow Treasury minister, said: "Millions of parents are paying the price for this government's economic failure as their child benefit is cut year after year. Working families on modest incomes will be hit harder. It tells you everything you need to know about David Cameron and George Osborne that they are hitting striving working families, while giving an average tax cut of £107,000 to 8,000 millionaires."

How does it work now?

Child benefit is currently a universal benefit, worth £20.30 a week for the first child, then £13.20 a week for each additional child. 

How is it going to work?

From 7 January, any family in which one of the parents earns more than £60,000 net, after pension contributions and charity donations, will have their benefit withdrawn.

Additionally, if a parent earns more than £50,000 (again net of pension payments and charity donations), they will face a new income tax charge. The charge will be equivalent to 1 per cent of child benefit for each £100 over £50,000. For example, if your income is £56,000 (net), your charge would be 60 per cent of the child benefit received.

HMRC estimates that up to half a million people will have to enter self-assessment as a result. Families with the option to contribute more to their pensions may be able to avoid self-assessment by reducing their income to below the threshold.

Case studies...

'I'll lose the same child benefit as my friend who earns £45,000'

Wendi New, 44, a single mother, lives with her daughter, Hollie, five, in Northallerton, North Yorkshire. She is a self-employed mural painter, who worked for years as an art and design teacher, before giving it up to set up her own business. She receives £330 in working tax credits a month, £284 in child tax credits and £85 in child benefits. She is set to receive about £650 less in child benefit by the end of 2015 than she could have expected before the freeze.

"I'm self-employed and trying to make a living but, at the same time, I'm penalised. When child benefit comes in, I use it for anything Hollie desperately needs. Maybe a school trip, or school dinners – they cost me almost £10.50 a week. She also grows so fast; it just means I won't be able to buy her that new coat, or those new shoes.

"It's the children that suffer in the end; it's like they're taxing children. I'm not frivolous with what I spend on food, and I sacrifice putting the heating on. But I'll lose the same child benefits as my friend who earns £45,000. I don't think they have weighed up how people like me are living."

'What we have goes on nappies, clothes, gas and electric. It's just enough to get by'

Zeph Brown, 35, lives with her husband, Neil, and their son, Liam, three, in Launceston, Cornwall. Neil works as a taxi driver, but stopped working for a few months recently because of illness. They have been surviving on £150 a week in tax credits and child benefit, and get help from a local food bank. Mrs Brown is not sure how they will cope without hundreds of pounds of child benefit.

"What we have to pay out every week goes on nappies, clothes, gas and electric. It's just enough to get by. We've had help from the food bank because when my husband was off work, we were struggling.

"It would be devastating to lose child benefit. I don't know how we'd cope. We're on pay-as-you-go electricity and gas, and, in the past, my husband and I haven't eaten a couple of times so that the little one can be fed. He comes first. It makes me angry because there are others who have nothing. It makes you feel sick inside."

Life and Style
tech

Sales of the tablet are set to fall again say analysts

News
A Brazilian wandering spider
news

World's most lethal spider found under a bunch of bananas

Life and Style
fashion

British supermodel and hitmaker join forces to launch a 'huge song'

News
news

The Duke and Duchess of Cambridge announce they are set to welcome second child in spring

PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
gaming

I Am Bread could actually a challenging and nuanced title

Sport
Mario Balotelli pictured in the win over QPR
footballInternet reacts to miss shocker for Liverpool striker
Voices
Sol Campbell near his home in Chelsea
voices
News
i100
News
Kimi the fox cub
newsBurberry under fire from animal rights group - and their star, Kimi
Sport
Fans of Palmeiras looks dejected during the match between Palmeiras and Santos
footballPalmeiras fan killed trying to 'ambush' bus full of opposition supporters
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Reception Teacher

£110 - £130 per day + Competitive rates of pay: Randstad Education Reading: Ca...

PMLD Teacher

£85 - £130 per day: Randstad Education Chester: We are currently recruiting fo...

SEN Learning Support Assistant

£45 - £60 per day: Randstad Education Chester: SEN Teaching Assistant (EBD)We ...

SEN Teaching Assistant

£45 - £60 per day: Randstad Education Chester: SEN Teaching Assistant (EBD)We ...

Day In a Page

Oscar Pistorius sentencing: The athlete's wealth and notoriety have provoked a long overdue debate on South African prisons

'They poured water on, then electrified me...'

If Oscar Pistorius is sent to jail, his experience will not be that of other inmates
James Wharton: The former Guard now fighting discrimination against gay soldiers

The former Guard now fighting discrimination against gay soldiers

Life after the Army has brought new battles for the LGBT activist James Wharton
Ebola in the US: Panic over the virus threatens to infect President Obama's midterms

Panic over Ebola threatens to infect the midterms

Just one person has died, yet November's elections may be affected by what Republicans call 'Obama's Katrina', says Rupert Cornwell
Premier League coaches join the RSC to swap the tricks of their trades

Darling, you were fabulous! But offside...

Premier League coaches are joining the RSC to learn acting skills, and in turn they will teach its actors to play football. Nick Clark finds out why
How to dress with authority: Kirsty Wark and Camila Batmanghelidjh discuss the changing role of fashion in women's workwear

How to dress with authority

Kirsty Wark and Camila Batmanghelidjh discuss the changing role of fashion in women's workwear
New book on Joy Division's Ian Curtis sheds new light on the life of the late singer

New book on Ian Curtis sheds fresh light on the life of the late singer

'Joy Division were making art... Ian was for real' says author Jon Savage
Sean Harris: A rare interview with British acting's secret weapon

Sean Harris: A rare interview with British acting's secret weapon

The Bafta-winner talks Hollywood, being branded a psycho, and how Barbra Streisand is his true inspiration
Tim Minchin, interview: The musician, comedian and world's favourite ginger is on scorching form

Tim Minchin interview

For a no-holds-barred comedian who is scathing about woolly thinking and oppressive religiosity, he is surprisingly gentle in person
Boris Johnson's boozing won't win the puritan vote

Boris's boozing won't win the puritan vote

Many of us Brits still disapprove of conspicuous consumption – it's the way we were raised, says DJ Taylor
Ash frontman Tim Wheeler reveals how he came to terms with his father's dementia

Tim Wheeler: Alzheimer's, memories and my dad

Wheeler's dad suffered from Alzheimer's for three years. When he died, there was only one way the Ash frontman knew how to respond: with a heartfelt solo album
Hugh Bonneville & Peter James: 'Peter loves his classic cars; I've always pootled along fine with a Mini Metro. I think I lack his panache'

How We Met: Hugh Bonneville & Peter James

'Peter loves his classic cars; I've always pootled along fine with a Mini Metro. I think I lack his panache'
Bill Granger recipes: Our chef's heavenly crab dishes don't need hours of preparation

Bill Granger's heavenly crab recipes

Scared off by the strain of shelling a crab? Let a fishmonger do the hard work so you can focus on getting the flavours right
Radamel Falcao: How faith and love drive the Colombian to glory

Radamel Falcao: How faith and love drive the Colombian to glory

After a remarkable conversion from reckless defender to prolific striker, Monaco's ace says he wants to make his loan deal at Old Trafford permanent
Terry Venables: Premier League managers must not be allowed to dictate who plays and who does not play for England

Terry Venables column

Premier League managers must not be allowed to dictate who plays and who does not play for England
The Inside Word: Brendan Rodgers looks to the future while Roy Hodgson is ghost of seasons past

Michael Calvin's Inside Word

Brendan Rodgers looks to the future while Roy Hodgson is ghost of seasons past