Child Benefit means-testing

There are two particularly interesting aspects to the debate surrounding the announcement at the Conservative Party Conference that Child Benefit is to be denied to any household in which someone is paying higher rate tax.

One is the argument accepted by so many commentators and Conservative Party members: that it is wrong for people on low earnings to be paying tax which is then paid in Child Benefit to high earners. What they seem not to have noticed is that: a) higher earners pay far more in tax than they receive in Child Benefit, so they already fund a higher proportion of the cost of Child Benefit than low earners do; and b) in order to deprive higher rate taxpayers of Child Benefit an entirely new and expensive administrative function will need to be established, thus wasting public funds. It is difficult to see why the Government made the announcement it did.

Why not instead raise the upper earnings limit on employees’ National Insurance contributions? This could reduce the deficit by the same amount, and it would not add to administrative costs.

The second interesting aspect of the debate is that it offers evidence of massive public approval of universal benefits. Child Benefit is popular because it provides a secure income floor for families with children; over- and under-payments are almost unknown; administrative costs are very low; and, because everyone with children gets it, it contributes to social cohesion.

If the Government wants to reduce administrative waste and at the same time unite our society ( – and isn’t a cohesive society a prerequisite of the Big Society?) then not only should it leave Child Benefit well alone, but it should also seek additional policies which will contribute to social cohesion, enable society as a whole to contribute to the costs of bringing up children, reduce inequality, and reduce administrative costs. To move from the proposed Universal Credit to a Citizen’s Income would do all of this.

Could the Government ask for more?

Footnotes

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