Stay-at-home mothers may get more support, says David Cameron

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Indy Politics

David Cameron today held out the prospect of greater financial support for stay-at-home mothers as he sought to justify the abolition of child benefit for high-earners.

Amid middle class anger at the decision to withdraw the allowance from higher-rate taxpayers, the Prime Minister insisted that the move was "fair" and would help protect poorer families from spending cuts.

But he also stressed that the coalition was committed to introducing transferable tax allowances for couples in which only one parent works.

A central criticism of the child benefit reform, announced by Chancellor George Osborne yesterday, is that it will unfairly hit single parents and single-earner households as the allowance will be withdrawn where any individual is earning £44,000 a year or more.

Two-income households in which both parents each earn less than the threshold - potentially giving them a household income of more than £80,000 - will keep the benefit.

Children's minister Tim Loughton suggested last night that the arrangement might yet be revised before it is implemented in 2013.

But Mr Cameron played down the idea of introducing means-testing that would take into consideration joint incomes, saying any such system would be "incredibly bureaucratic and expensive and, frankly, quite intrusive".

He also pointed out that a similar anomaly already existed in the income tax system, as one half of a couple could be required to pay at a higher rate irrespective of their partner's earnings.

He went on to suggest that there would be other measures to help stay-at-home mothers, however.

"Obviously it's coming in in 2013 and we have also got to look at other things we have promised to do," he told BBC Breakfast.

"If you look, for instance, at the issue of the stay-at-home mother, we do talk in the coalition agreement about having some sort of transferable tax allowance to help couples in that way.

"So there are things that we will try and do to make sure that all of what we do, if you look across the piece, to deal with the deficit is fair."

The Prime Minister added that he wished he was not having to remove child benefit from higher-rate taxpayers at all.

"It is difficult. I wish I wasn't having to do this. But we have to deal with the problems in front of us and we have to do so in a way that is fair and protects the poorest," he said.

There were signs of discontent among backbench Tories today as one, Margot James, tweeted that it was "very good" to hear Mr Loughton "confirm child benefit proposal needs to be revised".

Mr Loughton tried to play down his initial remarks, however, saying people were getting "over-excited" and that he was not calling for a review.

The reform will take child benefit away from 15% of those currently entitled and raise about £1 billion. It will cost one-child families around £1,055 a year and those with three almost £2,500.

The Institute of Fiscal Studies said the reform would be seen as unfair and warned that it would "seriously distort" work incentives.

The respected thinktank said the measure would mean a one-earner family with an income of £45,000 losing all its child benefit while a much better-off couple with an income of £40,000 each would keep the money.

But Mr Cameron said this morning: "Obviously we have this situation in the tax system itself. If you have one person earning £50,000, they pay top-rate tax, whereas if you have two people earning £25,000 they don't. This isn't a new principle."

The IFS also pointed out that a parent of two children with an income of £43,875 would actually lose money if given a pay rise of less than £2,975.

Shadow work and pensions secretary Yvette Cooper described the reform as an "unfair attack on child benefit" and, seizing on Mr Loughton's remarks, said it was already "unravelling".

"They have clearly been taken aback by the reaction of parents across the country," she said.

"George Osborne and David Cameron obviously don't understand what it means for families on middle incomes to lose thousands of pounds a year."

Mark Field, Tory MP for Cities of London and Westminster, said he was "right behind" Chancellor George Osborne on welfare reform.

But he told BBC Radio 4's World at One: "That said, obviously as a London MP, the concern is that to earn £44,000, or even £88,000, is not a huge amount of money.

"One of the slight concerns really is that there will be many aspirational people who are probably on £35,000 a year or so who may not necessarily lose their benefit now but think 'Well, in a couple of promotions' time, I could be in that boat'.

"So I have a fear this is going to be a very high profile issue but I think it does show a lot of bravery from the Treasury team to try and ensure we try and tackle this very urgent deficit."

He added: "I'm sure there will be a highly organised campaign and MPs of all political colours will be hearing from it - by the time I get back to my office, my email box will be more or less full, I suspect, with constituents getting in touch on this very issue."

The Chancellor said today that opponents of his child benefit shake-up had to justify why people earning £15,000 a year should pay taxes to fund allowances for people earning £50,000.

Speaking at a fringe event organised by the Sun newspaper, Mr Osborne said: "When I was looking across the piece at all the tough decisions we've got to take, I looked at the child benefit bill and said it is very difficult to justify at a time like this when we are so short of money and I've got to make so many difficult decisions.

"It is very difficult to justify taxing someone on £15,000 a year, £20,000 a year in order to pay child benefit to someone on £45,000 or £50,000, or by the way £100,000 or £150,000 a year.

"Now that is £1 billion - if the people here want to come forward with ideas about saving £1 billion, please do. But it is a question of priorities, it is not something you would want to do in a completely benign economic environment, but we are not in a benign economic environment.

"We've got a very high budget deficit and this is a fair measure."

Mr Osborne said the Government had looked at whether it was possible to assess total household income.

"We would have to devise, for the first time in the history of this country, a brand new means test that covers the entire population that assesses the income of every single household, which we don't do at the moment," he said.

"So we would have to create a brand new system, employ thousands of people to conduct the means test, and at the moment the system where the mother when she has a baby fills in the child benefit form, it's very simply done - all that would go.

"We would have a brand new, enormous means-tested system and I didn't want to do that to the 85% of people who will go on receiving their child benefit in exactly the same way."

The Chancellor added that to introduce a new means-tested system would "basically abolish child benefit and replace it with something very different".

Labour said the child benefit announcement meant that children were paying almost half the cost of the coalition Government's plan to speed up cuts in the deficit, despite Mr Cameron's proclaimed desire to run "the most family-friendly government we've ever had".

Net tax and benefit changes announced so far total £9 billion, of which £6 billion is coming from direct support for children, said Labour.

Ms Cooper said: "This is a shocking attack on children. Families of all incomes are being hit hardest.

"Government ministers clearly have no idea of the pressures ordinary parents face and how hard people are working to support their children.

"For 60 years there's been a consensus that we all depend on the strength of future generations and society as a whole should help support children as they grow. Now the Tory/Liberal coalition is ripping that up and leaving families to sink or swim.

"This gives the lie to the idea that cutting the deficit much faster will help the next generation. They are the ones paying the biggest price right now."

Shadow chief secretary to the Treasury Liam Byrne said the Conservatives were targeting families rather than bankers to fill the hole left in the nation's coffers by the financial crisis.

Mr Byrne said: "Britain's families did not cause the recession - yet families are first in line for punishment in the coalition's deficit reduction plan.

"Most of Britain's parents will be asking today 'Why am I and my kids being hit - why aren't the coalition asking the banks to do more?'.

"The truth is while the coalition is punishing families, banks are being handed a multibillion tax cut. This is a coalition that has its priorities horribly wrong."