Confusion and unfairness

A change is coming to child benefit. This Saturday, more families will become eligible as the earnings threshold at which you start losing child benefit increases. The government has finally recognised that ‘the way we treat child benefit in the tax system is confusing and unfair’ and proposed two changes to try to simplify it. It’s ironic that this confusion and unfairness was introduced by the government in the first place.

Child benefit was always designed to be universal – a way of supporting families with the various costs children bring. But the coalition government introduced a rule in 2013 that meant that if a parent was earning more than £50,000 a year, they’d have to pay back some child benefit. If they earned more than £60,000 a year, they’d pay it all back. The calculation was done on one person’s earnings, so a single-earner household could earn £60,000 and not get any child benefit, while a dual-earner household could earn £99,999 (nearly £50,000 each) and get full child benefit. This is the confusion and unfairness that the government chose to introduce. And it’s still hard to understand why only families with children are asked to pay more tax in this way, rather than every taxpayer.

It’s hardly surprising many families are put off claiming child benefit altogether.

The £50,000 threshold has not changed since 2013, but on Saturday it will rise to £60,000. The taper will then apply more gradually, so those earning up to £80,000 will be eligible for some child benefit.

The other change the government announced is a consultation on whether household earnings (rather than individual earnings) should be used to calculate eligibility for child benefit to get around the problem they have created where single earners lose entitlement more quickly than some better-off couples. This will not be the great solution the government hopes for. And any move to a household income assessment has consequences for women’s hard-fought-for financial independence.

We welcome the government’s recognition of the problems inherent in the way child benefit is handled, and indeed any increase in eligibility is a good thing. But there is a better solution for all of this. Rather than tinkering with thresholds, or overhauling the tax system, the government should just make child benefit universal once again. The chancellor himself said ‘it helps with the additional costs associated with having children.’ Through child benefit we can support families and help all children thrive.