By Paul Goodman
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Two days ago, David Cameron made it clear that he would like changes made to the child benefit plans which wreaked such havoc at the 2010 party conference, telling the House Magazine:
“Some people say that’s the unfairness of it, that you lose the child benefit if you have a higher-rate taxpayer in the family (but) two people below the level keep the benefit,” he said. “So, there’s a threshold, a cliff-edge issue. We always said we would look at the steepness of the curve, we always said we would look at the way it’s implemented and that remains the case."
Those who have followed the story closely may remember the Prime Minister voicing similar sentiments at the time. The Times (£) today quotes George Osborne as saying:
“We haven’t set out how we are going to implement that and we are going to do that in the next few months but the principle that it is not fair to ask someone who is earning say £20,000 or £25,000 to pay for someone who is on £80,000 or £100,000 to get child benefit is one that I think is very important.”
In other words, the Prime Minister would like a taper, so the Chancellor will have to look at it and other schemes. The challenge will be how to come up with a plan that doesn't involve a vast new means-testing bureaucracy. Whatever the pros and cons of child benefit may be, it is, as a universal payment, relatively simple to administer. A tapered system wouldn't be.
Osborne's child benefit plan by definition affects higher rate taxpayers and therefore many Tory voters – which is why the right-wing press, particularly the Telegraph (which seized on the House Magazine interview yesterday), have given the proposal such play.
To the Chancellor, the proposal is a means of demonstrating his slogan that those with the broadest backs must take the heaviest burden. To the Treasury, it is a way of cutting back on universal family allowances, about which it has had a gleam in its eye for decades. For all its anomalies, the move is reasonable enough as a one-off measure.
However, Andrew Lilico was right to argue on this site yesterday that child benefit is essentially a tax rebate, and that it represents an important principle in the tax system: that taxes should be related to the ability to pay.
Gordon Brown built a complex cats-cradle of means-tested benefits – part of his strategy of extending state dependency. Any long-term reduction in child benefit for higher-paid families would have the same effect of reducing incentives to earn. In the meanwhile, I wish Osborne luck with devising a taper that doesn't replicate the worst of Brown's errors.