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According to Justice Secretary Ken Clarke, paying child benefit payments to families with a higher rate taxpayer is “an anomaly”, because parents paying 40% tax should not be receiving what he describes as “social benefits.” The dictionary definition of anomaly is “an irregularity or deviation from the norm”. In Mr Clarke's vocabulary, however, anomaly seems to mean a policy he doesn't agree with – in particular, support for families. As readers with long memories might recall, Clarke used to describe the married couples' allowance as anomalous. As Chancellor in John Major's government he progressively reduced the value of that “anomaly”, leaving the way clear for its abolition by Gordon Brown.

In fact the great advantage of child benefit is that it is anything but an anomaly. It is certainly not irregular, nor does it ever deviate from the norm. First, because it is universal rather than means- tested, it does not create high marginal tax rates at the point of withdrawal. The removal of the payment (as currently proposed by the Treasury) will, in contrast, set a marginal rate of 100% as parents pass the higher rate threshold. If the Chancellor introduces a taper to try to offset this effect, the marginal rate will be lower but will be spread over a wider income range.

All means-tested benefits create such disincentives to earning: the choice is between a short sharp “cliff-edge” shock or extended but shallower pain. Child benefit, being universal – linked to the number and age of children rather than parental income – does not penalise parents for working harder and earning more.

The second advantage of child benefit is that it does not discriminate between types of childcare: it is completely even-handed between those who use institutional care, childminders, extended family or parental care. In contrast, childcare tax credits and vouchers are only available to those using registered, state-inspected carers. Proposals floated by some Conservative MPs to introduce a general tax relief for childcare, including nannies, may widen the scope of such childcare payments but will increase discrimination against parental care, making life even harder for one-earner families.


As Nick Clegg acknowledged this week, to refuse child benefit to a one earner household on £43,000 whilst continuing to pay it to a two-earner family on £84,000, is deeply unfair. The discrimination will be greatest against families where one parent is at home looking after children; it will also be felt by the many families with one higher earner and one low paid, part-time worker. Child benefit allows families to choose how to share work and care and does not seek to dictate that choice.

Nor does child benefit discriminate against marriage. It is paid to a parent (nearly always the mother) simply according to the number and age of her children. The mother is not required to declare her marital status or living arrangements, or to notify changes in that status. The proposed new system will require every individual paying higher rate tax to declare whether he or she is living with someone who receives child benefit. If he is married to the child benefit recipient it will be very hard for him to duck that question; hence the marriage penalty. For unmarried couples, the line is blurred. If parents live apart, a mother will receive child benefit even though the father of her children is a higher rate taxpayer who is supporting her financially. On the other hand, if she moves in with another man – or woman, or with her mum or dad – and if any of them is a higher rate taxpayer, she will lose her child benefit even if none of them is giving her any financial support. Does that seem fair? Hardly.

Last but not least, child benefit is cheap and simple to administer. It is triggered by the notification of the birth of a child and is paid until the child is 16. Because of changes introduced by the last government, the benefit continues to 18 (or in a few cases 20) provided the child is still at school. That's it.

Under the Treasury's new dispensation, however, more than a million taxpayers who have never filled in a self-assessment form will now have to complete one, in order to report their household circumstances and living arrangements. HMRC will then have to decide how best to claw back any child benefit which may have been received by an adult in his or her household – subject always to the questions of co-dependency outlined in the paragraph above.

What seems most bizarre about the new arrangements is that the UK has for more than 20 years operated a system of independent taxation, in which husbands and wives – and civil partners, or cohabitees – have been separately taxed. Not since 1990 has the taxman required spouses or partners to tell each other how much they earn, or to pay tax on each other's incomes. That principle has now been abandoned. On the spur of the moment, on breakfast TV in the middle of a party conference, the separate taxation of husbands and wives has been brought to an abrupt end.

The ultimate irony is this: under independent taxation, which provided no option to transfer or share income tax allowances, families with only one breadwinner have been paying more tax on their income than comparable two-earner families. As independent taxation comes to an end, instead of removing the penalty on one-earner families the new system will (for families on £43,000 pa) sharply increase that penalty. The Treasury's mantra seems to be: heads we win, tails you lose.

The only possible circumstances in which it would be “fair” for the Treasury to tax a husband on his wife's child benefit would be if it also permitted her to transfer her unused tax allowance to him. But the Chancellor has slapped down suggestions that transferable allowances will be introduced any time soon. By ending the universality of child benefit in this fashion, the Treasury wants to have it both ways: treating couples as a single unit when taking money from them, but deny them that option where it would increase their tax-free income. Public finances may be tight but it would be hard to find a more complicated, expensive, unfair, anti-family and, yes, “anomalous” way of raising a few million pounds.

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