Plan to cut child benefit 'fair'

 

Chancellor George Osborne today insisted that it was "fair" to ask
high-income families to share the burden of cutting Britain's debt by
removing their child benefit.

The Chancellor was challenged in the Commons by his Labour shadow Ed Balls, who said the plan would create a situation where a two-income family earning £84,000 will receive the benefit while a single-earner family on £43,000 will not.

The exchange came as speculation raged over whether Mr Osborne will use his Budget to water down the child benefit plan or to reduce the 50p income tax rate on earnings over £150,000.

Business Secretary Vince Cable today said there was an "understanding" within Government that if the 50p rate was scrapped, it would be replaced with a levy on wealth, such as the mansion tax favoured by Liberal Democrats.

But Labour leader Ed Miliband said that, while the Government should look at proposals for a tax on valuable homes, scrapping the 50p rate would be "absolutely the wrong thing to do".

Mr Osborne declined to reveal details of his Budget in his final appearance at Treasury questions in the Commons before the March 21 statement, telling MPs only that there would be no "unfunded giveaways".

Challenged over his plan - announced in 2010 - to remove child benefit from those earning over £42,745 a year from January 2013, Mr Osborne responded: "I think it is fair to ask those in the top 15% of the income distribution to make a contribution to the fiscal consolidation."

But the shadow chancellor told him that he could not "do the right thing" on child benefit because his economic policies had failed to deliver the growth he had been hoping for.

"The Chancellor's policy on child benefit seems to be that a two-earner family on £84,000 can keep all their child benefit, but a one earner family on £43,000 - whether a single-parent or where mum or dad stays home to look after the kids - will lose all their benefit," said Mr Balls. "What's fair about that?"

And Labour Treasury spokeswoman Rachel Reeves asked whether a single mother with three children on £42,000 should turn down a £1,000 pay rise which would cost her about £2,500 in lost child benefit under the new arrangements.

Meanwhile, there were growing signs of unrest on the Conservative backbenches over child benefit.

David Ruffley, a Tory member of the Treasury Select Committee, told the BBC he might vote against the plan, saying: "The child benefit proposal was flawed and I think the Chancellor needs to look at it again. It is an unsustainable proposal as he set it out."

Deputy Prime Minister Nick Clegg yesterday fuelled speculation that the child benefit cut-off could be raised to £50,000 or more, by admitting that the current plan created "anomalies" because it applies if one parent enters the 40% tax band, regardless of what the total household income is.

Today, Mr Cable confirmed that "a complex set of negotiations" on the future shape of the tax system were under way within Government ahead of the Budget.

Liberal Democrats were "not ideologically wedded" to the 50p rate, but were insistent that if it was scrapped it should be replaced by some form of wealth tax - whether a "mansion tax" on expensive homes or an extension of local taxes on property - to recoup more money from the super-rich.

The Business Secretary told the BBC Radio 4 Today programme: "There is a broad understanding... that if the 50p rate were to go - and I and my colleagues are not ideologically wedded to the 50p tax rate - it should be replaced by taxation of wealth because the wealthy people of the country have got to pay their share, particularly at a time of economic difficulty.

"How exactly that is configured is a detailed matter for negotiation but that principle must be upheld. Mansion tax actually is a very economically sensible way of doing it, but there are different ways of approaching it.

"There are different ways of doing it. It can be done through local government as well as central government, providing the principle is accepted that taxation should be related to the value of property."

The current system of taxes on property "doesn't work", said Mr Cable, adding: "There are vast numbers of extraordinarily valuable properties now around in the south of England netting very large gains for their owners - many of whom come from abroad incidentally - and it's not taxed at all. You get people with multi-million pound properties paying exactly the same council tax as someone in a semi."

Mr Miliband told BBC Radio 4's World at One: "I absolutely think it would be the wrong thing to do to cut the 50p tax rate."

Asked about the mansion tax proposal, he added: "I think it's an idea that the Government should look at but it shouldn't be used as an excuse for cutting the 50p tax rate."

PA

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
2015 General Election
May2015

Poll of Polls

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

Recruitment Genius: Experienced Bookkeeper - German Speaking - Part Time

£23000 - £25000 per annum: Recruitment Genius: This firm of accountants based ...

Recruitment Genius: Operations Manager

£30000 - £38000 per annum: Recruitment Genius: They are a financial services c...

Ashdown Group: Field Service Engineer

£30000 - £32000 per annum + car allowance and on call: Ashdown Group: A succes...

Recruitment Genius: Sales & Marketing Co-Ordinator

£15000 - £17000 per annum: Recruitment Genius: Well established small company ...

Day In a Page

Robert Fisk in Abu Dhabi: The acceptable face of the Emirates

The acceptable face of the Emirates

Has Abu Dhabi found a way to blend petrodollars with principles, asks Robert Fisk
Nepal earthquake: One man's desperate escape from Everest base camp after the disaster

Escape from Everest base camp

Nick Talbot was sitting in his tent when the tsunami of snow and rock hit. He was lucky to live, unlike his climbing partner just feet away...
Adopting high fibre diet could dramatically cut risk of bowel cancer, says study

What happened when 20 Americans swapped diets with 20 Africans?

Innovative study in the US produces remarkable results
Blake Lively and 'The Age of Adaline': Gossip Girl comes
of age

Gossip girl comes of age

Blake Lively is best known for playing an affluent teenager. Her role as a woman who is trapped forever at 29 is a greater challenge
Goat cuisine: Kid meat is coming to Ocado

Goat cuisine

It's loved by chefs, ethical, low in fat and delicious. So, will kid meat give lamb a run for its money?
14 best coat hooks

Hang on: 14 best coat hooks

Set the tone for the rest of your house with a stylish and functional coat rack in the hallway
Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

How a costume drama became a Sunday night staple
Miliband promises no stamp duty for first-time buyers as he pushes Tories on housing

Miliband promises no stamp duty for first-time buyers

Labour leader pushes Tories on housing
Aviation history is littered with grand failures - from the the Bristol Brabazon to Concorde - but what went wrong with the SuperJumbo?

Aviation history is littered with grand failures

But what went wrong with the SuperJumbo?
Fear of Putin, Islamists and immigration is giving rise to a new generation of Soviet-style 'iron curtains' right across Europe

Fortress Europe?

Fear of Putin, Islamists and immigration is giving rise to a new generation of 'iron curtains'
Never mind what you're wearing, it's what you're reclining on

Never mind what you're wearing

It's what you're reclining on that matters
General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

Chuka Umunna: A virus of racism runs through Ukip

The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
Yemen crisis: This exotic war will soon become Europe's problem

Yemen's exotic war will soon affect Europe

Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
Marginal Streets project aims to document voters in the run-up to the General Election

Marginal Streets project documents voters

Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

The real-life kingdom of Westeros

Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?