Child benefit 'incoherence'

Child benefit cuts will cause "incoherence" in the welfare system and undermine other Government reforms, a respected economic think tank has warned. Around a million households where at least one person earns over £50,000 will have it cut or stopped

Treasury: IFS criticism of Child Benefit is 'misleading'

The Treasury has defended itself following criticism from the Institute of Fiscal Studies (IFS) over its new Child Benefit system.

A spokeswoman for the department said it had disagreed with an IFS proposal to "abolish child benefit completely and (subsume) it into the tax credit system".

Responding to the claim from the IFS that families affected by the new Child Benefit system stand to lose an average of about £1,300 a year, the spokeswoman said:

We are having to take some difficult decisions to reduce welfare spending and it is important that those with the broadest shoulders bear the biggest burden.

She went on to challenge the criteria by which the IFS had to judge the reforms:

Looking at marginal rates in this way is misleading, as the charge simply withdraws some or all of the money that has been paid in child benefit - no one will be taxed more than the benefit they receive.

Withdrawing child benefit on the basis of the combined family income would require intrusive means-testing of all eight million households getting child benefit. The way we are doing it is simpler for the vast majority of families and significantly removes the potential cliff edge effect of the change.

Child Benefit reforms create 'incoherence' in welfare system

Perhaps the biggest concern is the incoherence it creates in the welfare system. We already have the Child Tax Credit, and soon its imminent replacement, namely the child additions within Universal Credit.

The reform to Child Benefit will mean that we have two systems of income-related support for children. But the relationship to income will be completely different in each case: based on family income in one case and the income of the highest-income family member in the other; withdrawn at different rates as income rises; and with the withdrawal starting at very different income levels.

– Institute for Fiscal Studies

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New Child Benefit system to hit pockets of thousands

Families affected by the new Child Benefit system stand to lose an average of about £1,300 a year, the Institute for Fiscal Studies (IFS) said.

It is estimated that around 820,000 families, in which at least one adult has a taxable income exceeding £60,000 per year, stand to lose all their Child Benefit via a new income tax charge.

Additionally about 320,000 families in which the highest-income adult is on between £50,000 and £60,000 would have some, but not all, of it clawed back.

The remaining 85% of families currently receiving Child Benefit will be unaffected for now, although more will be affected in time because the £50,000 threshold is planned to be frozen in cash terms, the IFS added.

HMRC grilled on child benefit changes during Q&A session

HM Revenue & Customs have held a Q&A session on Twitter on forthcoming child benefit changes.

Some people wanted to know why they had not received a letter about the changes.

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@hmrcgovuk Where was my letter or any direct communication? Expecting us to be telepathic? Ridiculous

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@lucycook74 HMRC has sent 800k letters but not everyone will have received a letter. To find out more http://t.co/k9QSmkDg ^KR #HICBCqa

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@hmrcgovuk #hicbcqa We've not had a letter re CB. We've not moved for 6 years. How do we tell you our CB changes as income between 50-60k?

Some families yet to be warned about child benefit changes

Almost a third of families affected by forthcoming changes to child benefit have not been formally warned they will no longer be eligible for the payment, the Daily Telegraph reports.

The newspaper says that as a result more than 300,000 people will have to begin completing tax returns for the year ending this April or face substantial fines.

child benefit letter
From 7 January 2013, households where at least one person earns more than £50,000 will have the benefit cut or stopped. Credit: HM Revenue and Customs

A spokesman for HMRC told the newspaper: "There may be cases where people’s circumstances have changed, for example their income may have increased or address may have changed, and we will not yet have up-to-date information.

"However, to ensure people know about the changes we are also using extensive advertising, media and online activity, as well as written communication.

Find out more about the changes on the HRMC website.

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Clegg: Child benefit decision was 'excruciatingly difficult'

Deputy Prime Minister Nick Clegg has admitted that axing child benefit for the richest families was an "excruciatingly difficult" decision.

Letters will be going out from HM Revenue and Customs from today to advise around one million households on £50,000 or more how their payments will change.

Deputy Prime Minister Nick Clegg,
Deputy Prime Minister Nick Clegg Credit: David Jones/PA Wire

Mr Clegg said:

"I perfectly understand why people who don't feel wealthy don't like this change but I will ask them just to reflect for a minute there are many, many others, the vast majority of people in this country who are on much lower incomes than them, who are also having to make sacrifices."

Your views: Child benefit changes for high-earners

Around one million letters are being issued by HM Revenue and Customs to families affected by next year’s changes to Child Benefit.

We asked for views on the changes on the ITV News' Facebook page. Here are some of the responses.

Of course people earning that do not need it but that is not the point.

It was never intended to be a means tested benefit why should people who actually pay their taxes not be entitled to something back.

They are not eligible for any tax credits either it is not fair

– Donna Kennedy

The point is if 1 person earns 50K it stops but if 2 people earn 49k each they still get the money. Just another massive c*** up by this government.

They should put caps on total household income... a proper overall of the benefit system is needed not just some unfair hairbrained ideas.

– Jackie Perry

I would love to be able to spend our 50k on my family but we have to pay 40% tax. You keep your child benefit & tax credits and let us keep a REASONABLE percent of the money we earn.

I am so sick of reading/hearing about high earners being privileged - yes we have the privilege of subsidising low income families at the expense of our own.

– Victoria Davis

Treasury: Child benefit for wealthiest 15% difficult to justify

Responding to a Conservative poll, that revealed that 82% of respondents backed plans to cut child benefit for high-earning families, a Treasury spokesman said:

In a period when the Government is having to reduce welfare spending, it is very difficult to justify continuing to pay for the child benefit of the wealthiest 15% of families in society.

The unprecedented scale of the deficit has meant that the Government has had to make tough choices to reduce public spending; but we have always been clear that those with the broadest shoulders should carry the greatest burden.

Eighty-five per cent of all families with children are unaffected and will continue to receive child benefit in full. Ninety per cent will benefit in full or in part.

– Treasury spokesman

Tory poll reveals support for high-earner child benefit cuts

An overwhelming majority of voters support Government plans to cut child benefit for high-earning families, according to a private poll commissioned by the Conservative Party.

The Populus poll found 82% backing for the move, which will hit the top 15% of earners on £50,000 or more and end the principle of universal entitlement to child benefit.

  • 2,066 British adults were questioned between October 24 and 26.
  • 82% backed the plan, against 13% who opposed it.
  • Among households earning £69,000 or more, 74% were in favour, compared to 82% of those earning £55-69,000 and 80% of those earning £41-55,000.
  • Strongest support, at 89%, was found in households with a total income of £14-21,000.
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