Dear Mr Osborne,
You have mentioned on a number of occasions how important the principle is that it is ‘not fair to ask someone who is earning say £15,000 to pay for someone earning so much more to get child benefit’. This statement is not only divisive but it is misleading. Individuals on 15k see 2k deducted in PAYE taxes but they are entitled to receive back £9k in working tax credits, council tax rebate and housing benefit (depending on location). If they have a family that entitlement rises e.g to £23k with three children. Far from subsidising others those on 15k receive generously from higher grossing taxpayers and in particular from those on the higher rate.
Secondly your statement conveniently ignores the fact that an individual on 15k may only have one child to support while an individual on 45k may have three or four dependents. Annex A of the Budget 2011 Document refers a number of times to a formula called ‘equivalisation’. “As households with more adults and children require higher levels of household income and expenditure to achieve the same standard of living, an internationally standard adjustment called equivalisation is used to ensure households are compared on an equal basis.” (Budget 2011 Annex A Impact on Households A 38) Can you confirm whether this process has been used in the proposed changes to child benefit?
You have also made the claim that a household with a single earner on 45k falls within the top quintile. Can you confirm that this is so? Other research shows that when child benefit is taken away the income of a single earner couple with three children, earning just over the higher rate, will only be higher than 38% population. (CARE Taxation of Families 2009/2010)
Once you remove universality you have introduced a means test. The means test that you have chosen is simple but not fair. Meanwhile it is untrue to say that a new system would have to be created as the child tax credit means test already exists and is relatively fair looking at ‘household’ not ‘individual’ income and number of dependents. Indeed all the anomalies arise from not using the family or household as the frame of reference. Alternatively it can be incorporated in the new universal credit scheme.
Incidentally a third characteristic of child benefit was that it was paid to the mother to provide her with a measure of security from dependence upon the husband. It is an irony of your proposed change that women who earn up to £41k per year will keep this financial support while those who are wholly dependent on a husband’s income of £45k will lose all financial support regardless of how many children they have.
A mother of five young sons, I belong to a campaigning organisation ‘Mothers at Home Matter’. We seek a fairer taxation system for families. I have attached our latest Newlsetter which looks at how our taxation and benefit system levels family income across a wide range of incomes and the benefit trap it creates. The article on p5 looks at the unfairness and adverse effects which will be caused by the proposed policy. Please take time to read it.
A generation ago it was normal for women to stay at home while their children were young. Subsequently the family and therefore the foundations of society have been weakened. The present system penalises the traditional family, offers no support for marriage and creates a massive financial disincentive to sacrifice an income to take care of the family. The proposed change to Child Benefit continues this destructive trend.
I look forward to hearing your response.
Mothers at Home Matter
cc. David Gauke MP Exchequer Secretary to Treasury
cc. David Burrowes MP (local MP Enfield)