Sunday, May 19, 2024
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I told you so


IT IS nearly 11 years since I picked up the phone to give Nick Clegg a piece of my mind.

The Conservative-Liberal Democrat coalition had made changes to child benefit which annoyed me, so I decided to have a few words with the Deputy Prime Minister, who did a radio show on LBC at the time. I ended up on the front of the Daily Mail, met Kathy and talked about setting up a website together. The rest is history.

At the time, the story was pitched as stay-at-home mothers were punished and given a bad deal. This was certainly the case. However, in the intervening ten years, this change to child benefit has developed into an all-out attack on families, both dual income and more traditional.

The government has since funded childcare to an even greater extent, and we have plenty of objections to that. However, any family that somehow does a bit better in Britain is now punished by the child benefit changes that I objected to all those years ago. So much so that the Sunday Times is running a campaign calling for fairness for child benefit.

Take the cut-off point. If one parent in a family earns more than £50,000 a year, they start to lose their entitlement. Once they earn £60,000 or more, they are entitled to nothing. The common retort is, if you are earning £50,000 you shouldn’t get any benefits at all, shut up and go home. This is stupid and idiotic. Let’s put this to bed once and for all, and I am shouting now for the slow learners at the back of the class.

If you earn £50,000 your tax burden is significant and there is no tax allowance for the fact that you have children. This is unusual and unique in both Europe and the US. In fact, child benefit was introduced to replace the axed child tax allowance offered before. Middle-class families keep the show on the road. Child benefit is in effect just some of their hard-earned money remitted back to them by our overlords in government.

In the intervening time two things have happened: the tax burden has increased and most obviously inflation has risen sharply. Ten years ago, 50 grand was quite a lot of money. These days it would not amount to a deposit on a bike shed in the roughest part of stab city known as London.

The Sunday Times: ‘The £50,000 salary threshold at which parents start losing the benefit must rise with inflation. About one million families — 13 per cent of recipients — had to pay back some or all child benefit in 2013. Today it’s two million families — 26 per cent — according to the IFS. A third of families will be affected by 2028. This is fiscal drag at its worst.’ If the original threshold had increased with inflation, it would now be at about £64,300 today.

How many families barely noticed the change in 2013 and thought £50,000 – wow, to be earning that! – now lose child benefit? There is something so wrong in a family doing the whole child in nursery routine: you put your tiny baby in nursery at nine months old for ten hours a day all the way to school, do it for a second child perhaps and then, as you have slowly clawed your way up to a promotion or two, earn a middle income, bam, the tax man says I’ll have back most of your salary increase by way of tax and/or High Income Child Benefit Charge. In sum, it’s just another tax on hard work and aspiration. You wonder why people bother.

In fact, if you miss the fact that you must pay back some or all of your child benefit the tax man will come knocking at your door. The Sunday Times says that ‘more than 440,000 fines have been issued by HM Revenue & Customs relating to child benefit’. The government then make you do all the work in paying back the child benefit that you now owe them, as you had the temerity to work harder and get a promotion.

The Sunday Times: ‘Eligibility should also be based on household rather than individual income. It is ludicrous that a family with a total income of £99,999 could keep the full benefit, while a family with a single income of £60,000 must pay it all back.’

Indeed on Saturday, the Times splash was that Hunt might raise the child benefit threshold:  ‘Jeremy Hunt is considering extending child benefit to hundreds of thousands of middle-income families as part of a package of tax cuts in the spring Budget.’ So he is going to give back what the Conservatives took from middle-income families ten years ago. That’s sure nice of him.

‘Hunt said in a recent interview with Martin Lewis, the budgeting expert and campaigner, that he recognised the ‘very big distortion’ caused by the £50,000 childcare benefit threshold. ‘I fully accept there is an unfairness in what happens with dual-income families on £50,000 each compared to a single earner on £100,000,’ the chancellor said. 

It’s just amazing how this was never said when this anti-family, anti-conservative provision was brought in, but amazingly as an election looms and middle-income conservative voting families are being crushed by HMRC, it is being said now. AMAZING!

In the same piece economists from both the Institute of Fiscal Studies and the Resolution Foundation are quoted on how the withdrawal of child benefit disincentivises work. Again, we said this at the time and I didn’t get much backing. I remember saying it over and over again on radio programmes, TV programmes and newspaper articles. If only people listened to the crazy lady on the telly box!

The most obvious and moral thing (given falling fertility rates) would be to make child benefit universal again. ‘Making child benefit universal again would cost £4billion a year, according to the Resolution Foundation — a small sum in fiscal terms.’ Tell me again how much Sunak has shovelled to Ukraine? £2.5billion was the last giveaway, but I’m pretty sure it is at least £4billion over the course of events.

Anyway, if we are to learn anything from the last ten years, it’s this simple lesson: listen to Laura. I did tell you at the time. 

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