Child benefit 'anomalies' discussed

Mar 6 2012

The Government has been accused of being "in disarray" after ministers indicated they were prepared to water down plans to strip better-off families of child benefit.

Deputy Prime Minister Nick Clegg acknowledged the move would go ahead, but said there were still discussions in the coalition about how "anomalies" could be addressed.

Speaking to The Agenda on ITV1, he said: "The removal of child benefit from people that earn much more than others will happen. How you actually administer it and exactly the cut-off point - we have always been very open and we will look at that."

The Treasury declined to confirm reports that the Chancellor is considering softening the impact of the child benefit reforms on middle-income families by raising the earnings threshold at which it will be withdrawn to £50,000 or even £80,000.

Mr Osborne announced at the 2010 Conservative Party conference that from January 2013 couples with at least one parent earning more than £42,745 a year - the 40% tax rate threshold - would lose their payments, saving the Treasury around £1 billion. Details of how the change will be introduced are expected in the Budget on March 21.

But the move has proved unpopular, sparking claims that lone parents and single-earner families are being penalised.

A family with one working parent earning £43,000 would lose about £1,750 a year if they have two children and £2,500 with three, but a couple who both work and each earn £40,000 would keep all their payments despite having a total household income of £80,000.

Justice Secretary Kenneth Clarke said there was no question of ministers backing down on the principle that high-income families should not receive child benefit.

Mr Clarke told ITV News: "As far as I am aware the Government has not made a U-turn on child benefit and taxation at all. It is quite wrong that some people are firstly paying the higher rate of income tax on the basis that they're above-average earners and at the same time receiving a social benefit to help them pay for their children. It's an anomaly which, at a time of acute financial crisis, was bound to be addressed."

Labour accused the Government of being in "disarray" over child benefit. Shadow chancellor Ed Balls said: "Ahead of this evening's debate the Government's policy on child benefit is now in total disarray. These unfair changes are due to hit hundreds of thousands of families on middle incomes in just 10 months time. The Chancellor must now put implementation of these plans on hold and announce an urgent review."