The child benefit cut – a trick or treat?

George Osbourne, Chancellor

Chancellor George Osborne announced during the Tory conference in Birmingham, that he is planning to cut child benefits for the better off, the BBC said. The Chancellor made it clear that the cut, which will apply from 2013 to people on the 40% and 50% income tax rates. People earning more than about £44,000 would be affected if the measure was implemented now, although this limit comes down to £42,375 from April.

This is the biggest cut in the budget, since the new government took office in May 2010 and is part of the emergency measures, proposed by the Tories in order to cut the budget deficit. Osborne came under severe attack from the Labour and even from some right-wingers, claiming that the austere measure will put high-earning single mothers in a losing situation, and will discourage fathers to put their names on birth certificates. But this contrast somewhat with the recent YouGov polls which found 83% of voters back Chancellor George Osborne’s announcement that child benefit will not be paid to parents to earn more than £44,000 a year from 2013. This is despite criticism that a two-parent household earning £43,000 each will keep the payout, but a single parent earning £44,000 will not.

Although the new policy is probably detrimental to the welfare state, it is one of the most sensible actions, which a government could undertake in the context of the recent economic situation in the UK. After the closure of more than 30 per cent of the crown and magistrates courts in England and Wales has been announced, the child benefit cut is not much of a surprise. Despite the negativism, which the intended policy has provoked, it will help raise more than 1 bn pounds per year. Latest statistics show that in the calendar year 2009 the UK recorded a general government deficit of £159.2 billion, which was equivalent to 11.4 per cent of the GDP. At the end of December 2009, general government debt was £950.4 billion, equivalent to 68.1 per cent of GDP (Office of National Statistics 2010). Only a glimpse at the numbers is enough to reveal a disturbing incompatibility with the requirements of the Maastricht treaty, which sets a much lower threshold of 3 per cent for the deficit and 60 per cent for the debt. In a situation like this one, any government, regardless of its ideological reservations, would attempt to minimize any excess spending. There are certain occasions, when the political analysis should give more credence to the numbers and post-electoral sentiments should be left aside, for the benefit of the citizens. Although in the short-run the policy might seem extreme and probably very ‘unfair’ for some, its long-run economic pluses and sustainability disclose a government with an iron hand.

The policy is also a reminder that the new government is eager to go from plans to actions, and the new budget announced by George Osborne not long ago is quickly being implemented – political sensibility, which, compared to the previous government’s sluggishness and lack of enforcement – might appeal even to some left-wing supporters.

© October 2010

Advertisements
  1. #1 by Paul Lawrence on October 6, 2010 - 8:21 pm

    I am confused by this blog. The issue with this cut is not the cut itself. But the fact that two parent families earning £86k will still receive the benefit.

    That is the issue. I doubt anyone in their right mind would consider cutting child benefit to the wealth is wrong, but that is not what has been done.

    Also let’s call a spade a spade. £44k is hardly a high earner.

    If you are paid £44k you will take home about £2k a month, minus rent/mortgage, electricity, gas, travel and food and by my calculations you’ve got about £500 left. Oh did i forget child care? LOL whoops!!!

    This cut was totally ill-conceived and badly thought out. But again I understand why. I suspect none of the people in the room doing the calculation remember what it is like to earn only £44k.

  2. #2 by Sylbourne Sydial on October 7, 2010 - 10:21 am

    …what about the dificit and the fact that the same children benefits which will be cut will also suffer in the long run due if we dont try to address the dificit earlier than later?

    Would it be wise for children tomorrow paying for the ills and bad mismanagement of today?

    I do agree that there need to be fine tuning of the policy when it comes on to means test and etc so this is not the end of the policy make up until it comes into existence in 2013.

  3. #3 by Gergana on October 10, 2010 - 6:44 pm

    I agree that 44k a year can hardly be classified as hard earner. Still, we must not forget that the only way the deficit can be cut is through policy like the ones undertaken by the government – benefit cut and administrative cut. Otherwise, the burden of the foreign debt and the deficit will fall upon the shoulders of the same taxpayers, who are not complaining for having to part with the child benefit. Any government, labour, conservative, social democrat would do the same in the current economic situation I think. All the Conservatives are demonstrating is economic sensibility, rather than the political austerity they have always been accused of.

  4. #4 by Gergana on October 10, 2010 - 6:44 pm

    Correction: As ‘high’ earner I mean, sorry. Not hard

  5. #5 by Gergana on October 10, 2010 - 6:46 pm

    Correction: I agree that 44k a year can hardly be classified as hard earner. Still, we must not forget that the only way the deficit can be cut is through policy like the ones undertaken by the government – benefit cut and administrative cut. Otherwise, the burden of the foreign debt and the deficit will fall upon the shoulders of the same taxpayers, who are NOW complaining for having to part with the child benefit. Any government, labour, conservative, social democrat would do the same in the current economic situation I think. The Conservatives are demonstrating nothing but economic sensibility, rather than the political austerity they have always been accused of.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: