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