Nick Clegg admits government is reconsidering child benefit cuts

5^th March 2012

Annalisa Ratti

Annalisa Ratti

5 March 2012

This morning Nick Clegg told BBC Breakfast the government is looking again at child benefit cuts because of the “unintended consequences” of the current plans.

Mr. Clegg confirmed the government is considering changes to its plan for axing child benefits from higher taxpayers.

Under the current plan, all families in which one parent earns more than the £42,475-a-year threshold for 40 per cent tax will lose all their child benefit.

A couple with two children would lose more than £1,750 a year. But a family with a combined income of more than £80,000 could keep their child benefit in full, provided neither parent pays higher rate tax.

The Deputy Prime Minister said it was right to ensure that those on the highest salaries bear their share of the burden of deficit reduction.

He told Sky News: “There’s an issue about how you do that, so you make sure you don’t create these unintended consequences where, say, a family with one upper-income earner get child benefit removed when there’s another family with two income earners who collectively earn more but keep the benefits.”

The Treasury is studying a range of detailed options for softening the impact of the change due to come into force next year: raising the income threshold to £50,000, giving higher-rate taxpayers only half the child benefit or restricting payments to families with children under five.

But in a statement last night the Treasury made no reference to higher-rate taxpayers, focusing instead on those earning more than £80,000.

Clegg declined to discuss any specifics of the alterations being considered, saying that his priority was seeing a rise in the threshold at which people start paying tax.

Critics last night warned the detailed options being considered did not go far enough. Tory MP Mark Reckless said: “None of these proposals addresses the unfairness of single-earner couples with a stay-at-home parent losing their child benefit while two-earner households with much larger incomes keep theirs.”

Shadow Chancellor Ed Balls yesterday defined the child benefit changes as “perverse anomalies” which would affect hundreds of thousands of families.

He pointed out that a family with three children with a top-rate tax payer would lose £2,500 – the equivalent of a £3,500 salary cut because child benefit is tax-free.

According to the Treasury, these child benefit changes would save £2.4bn in 2013-14 and £2.5bn in 2014-15.

Annalisa Ratti