Monday, October 04, 2010

Child benefit: the middle classes are revolting

Has George Osbourne made a mistake with his proposal to scrap child benefit for higher earners? One argument has it that by doing this, he hopes to undermine support for the welfare state itself by depriving the relatively wealthy of any stake in it. The counter-argument is that he will succeed only in pissing off the kind of people who would have otherwise been expected to support, or at least go along, with his austerity fetishism.

If Cath Elliot's rant on Liberal Conspiracy is even slightly representative, the latter might seem more likely. Feel the outrage, people:
"George Osborne’s announcement today that from 2013 Child Benefit payments will be axed for any family with a parent earning enough to put them in the 40-50% income tax bracket is neither "fair" nor "right" as some commentators would have us believe: it’s actually an attack on the basic principles of the welfare state, and it’s an attack on women."
Uh huh? Now looky here. As someone who has worked both in welfare rights and in what was then called the Unemployment Benefit Office, I'm easily persuaded that means-testing is often ineffectual because it provides disincentives to work and to save; it requires the employment of people to carry out the means-testing; and the complexity of the administration often means the people entitled to the benefits don't actually get them. Then add to this my instinctive scepticism about anything this government, and in particular this Chancellor, does...

But I'll tell you a really crap argument against this proposal and it is that by introducing a means-test for frankly fairly comfortable people, it somehow represents some historic rupture in the universality of child benefit. There's a simple reason for this: child benefit is counted as income for people on income-based unemployment or in-work benefits. It is already means-tested, in other words. Now, I'll refrain from making mordant comments about not remembering the howls of outrage when this was introduced - partly because it was such a long time ago. But I would have to say that if you think means-testing child benefit is outrageous, you've left it rather late to raise your voice.

Update: Cath disagrees here arguing:
"No it’s not, it’s taken into account when other payments are means tested, but the amount of child benefit itself remains unchanged."
By this logic, Osbourne should have announced not the withdrawal of child benefit for high earners but the introduction of a new tax of exactly £20.30 a week for high earners with a child. This would be ok because what seems to matter is not the actual level of income received but what you call it.
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