The Economic Deficit


The sheer size of the economic deficit facing this country means that the Coalition Government has to make decisions which some will think are unfair.

Child benefit has always been a simple and effective way of helping parents, getting the money direct into the family’s income, quickly and without a lot of form filling.

Child benefit is a big part of the benefits system. At the moment it accounts for about 7 per cent of national spending on social security and tax credits. In total, that is around £12 billion a year. 

There are about 1.2 million households receiving child benefit where there is a higher rate tax payer. By 2013, these families will no longer get child benefit.

As I have said, the essence of child benefit has always been that it is a straightforward way of delivering benefits to families. It would have been possible to devise a system where the income of each and every household was assessed, to counter the argument that a family with two incomes might have more coming into the family kitty than a family with only one earner assessed at the higher tax rate.

But that would have meant setting up a new tax credits system with each household providing the information about the family income every year. It would have been very complex.

It is not fair or sensible to expect families on lower income to pay taxes which then go to families on higher incomes in the form of child benefit.