Families paying the higher rate of tax will lose child benefits from 2013, as one of the Conservative Party cuts comes into effect. Additionally, all families will lose benefits for the third and subsequent children.
The “absolutely necessary” decision is expected to save £1bn per year, though the three year grace period means that saving won’t kick in yet.
Government statistics suggest that the 7.7m families universally receiving child benefit currently cost the economy £12bn per year. This change would affect around one-sixth of (1.2m) families.
Chancellor George Osborne said, “It’s very hard to justify taxing people on much lower incomes in order to pay the child benefit to some of the better off in our society.”
As with all cuts, this will hit some families much harder than others. One particular anomaly is that a single parent earning over £44,000 (the first tax rate boundary) would lose benefit whereas a family with two parents earning just under £44,000 would keep the benefit.
Child benefit money will be reclaimed via the tax system, though Osborne urged higher rate taxpayers to voluntarily stop claiming the benefit, suggesting it would be the “most sensible” solution.
Children’s charity Barnados said that it “bitterly regretted” the cut, but that if it was necessary then it should be assessed on the basis of income.
The Child Poverty Action Group said it was unfair that families were yet again paying the price for a debt crisis not of their making.
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