Child Benefit Cuts

The government has announced at the Conservative party conference that, as part of their fiscal austerity programme to eliminate the public spending deficit, it is only fair to cut child benefit for those parents considered better-off and, therefore, able to carry a heavier share of the tax burden i.e. those with annual earnings of £44,000 or more and in a higher tax bracket.
However, due to the perverse and socially engineered effects of the current UK tax system, where everyone (whether married or not) is taxed as a separate individual, this would seem to imply that a single mother earning more than £44,000 would lose her child tax credits whilst a household where both parents each earn less than £44,000 for a joint income of up to £88,000, could still retain their child benefits. It has as a result been quite roundly attacked as manifestly unfair although an opinion poll taken immediately after found 85% of respondents in favour and 15% against, roughly in the same proportions as those who would still retain child benefits versus those who would lose out!
Given that the Conservative party in common with its opponents must employ clever political thinkers and analysts, this begs the question that, if it is so easy to pick such obvious holes in this child benefit tax policy, why announce it now during the Conservative party conference and in advance of the detailed programme of cuts planned to be announced on 20th October? One would like to think that this is part of an overall policy to guide public opinion towards the benefits of a tax system which not only provides tax concessions for children but also for the supporting married couples, taxed on their joint income as per the French system for example.
The Conservative party has traditionally supported marriage as a source of stability in society and the prime minister in defending these proposed child benefit cuts has already suggested that married status should be recognised within the tax system. There are of course the arguments of those who say that this discriminates against single, childless individuals and that there is no evidence that homes with two committed but unmarried partners cannot provide as stable a family environment as a married couple. In albeit mainly Catholic but constitutionally secular France, the tax system favouring marriage and children can also be traced back to the need to rebuild the nation after two world wars fought over its soil. Indeed with the almost statutory three children the resulting low level of direct income tax paid is highly attractive to young parents, during their early and generally lower income married life.
With civil partnerships including same sex couples now recognised under UK law, why cannot the tax system recognise marriage and the added costs of raising children during the early, more financially-stretched years? Certainly, Ed.Milliband the recently elected new-generation leader of the Labour party, who has in the past been too busy to have his name on the birth certificate of his first child, has admitted to the press that he is considering marriage to his partner in the future.

2 Responses to “Child Benefit Cuts”

  1. Karl Bletchen dit :

    Talking in relation to the subject a little bit, we » »re seeing austerity and tax protests in Greece, Ireland and now the UK – where next? It » »s not like the economic situation will be improving very soon. We should be encouraging growth, not cut it off at the knees.

  2. admin dit :

    We agree there is a need to stimulate growth but this cannot just come from the government leaving more money in peoples » » » » » » » » pockets through lower taxes, in an effort to stimulate consumer spending. This is also a need to regain international competitiveness in order to grow from export business for which a good example is Germany, which has kept its cost base down over the past 10 years and is now benefiting from this. Government borrowing costs have again to be kept under control by cutting budget deficits for fiscal credibility, to satisfy the financial markets and keep interest rates down; unfortunately this also leads to cuts in the public sector and the associated jobs. Growth in the private sector then needs to be able to offset job losses in the public sector, with unemployed, ex-public sector workers having to show flexibility and making themselves more employable by the private sector, through adapting to the latter » » » » » » » »s different working standards. Outside the Euro-zone, the UK has the advantage of allowing the value of its currency to drift lower to regain international competitiveness but has still suffered violent demonstrations in London from students protesting against tuition fee increases (not job losses yet although these will come as the public sector cuts start to bite in 2011); Greece and Ireland within the Euro-zone do not have this flexibility to essentially devalue their currency and have instead to cut their local costs, with unfortunately the ensuring protests against the impact on living standards.

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