Having children is not a luxury. The future of the country and its economy depends upon there being enough children to sustain the economy in the future. It is expensive, and has become even more expensive, bringing up children who now have to be kept by their parents much longer with the extension of Higher Education. It is thus economic sense as well as “fair” that the tax system should recognise this and that parents with the expense of bringing up children should pay less tax than people without the substantial expense of raising children.
Until the 1960s we had income tax allowances for children. The Wilson Government replaced this with Child Benefits on the reasonable grounds that the better off benefitted more from tax allowances, that universal Child Benefit was easier to administer and, as it was paid to the mother, it was more likely to be spent on the children.
Gordon Brown “muddied the waters”. He wanted to increase financial support for those raising children but wished to save the expense of doing this on a universal basis. He therefore introduced a separate Child Tax Credit to exclude those on higher incomes from benefitting.
The bottom line of all of this is that, from both an economic and fairness perspective, our tax or welfare system need to compensate parents for the expenses of bringing up children.
I am, therefore, glad to understand that the Government is thinking of changing its previous proposal here. It is clearly wrong that a family with a single earner should lose Child Benefit if their income is over £40k p.a., where a family with 2 owners with an income of £80k p.a. – £40k earned by each parent – should not. This would be a massive discrimination against mothers doing a full time job in raising their children. But I very much hope the Government is re-thinking in the wider context I have set out above. Far better to leave children’s allowances alone as a universal benefit as an allowance for the cost of raising children.
From a political perspective tax increases are already hitting hard aspiring, middle class entrepreneurs, business and professionals which are the bedrock of Britain’s prosperity and stability.
The measures to reduce the budget deficit have so far been far too much on the side of raising taxes rather than cutting Government expenditure. There is still masses of waste in the system – masses of Quangos and Regulations that contribute nothing to the economy. It is worthwhile noting that a major part of Boris Johnson’s campaign is to cut expenditure in London by £3.5bn p.a, largely by cutting more waste. If he succeeds, he will create a compelling example for Central Government.