Freedom of Information request re Child Benefit withdrawal

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Below is a Freedom of Information request from a mother regarding Child Benefit cut (that came into force Jan 2013).  MAHM has been given permission to reproduce the letter.

TEXT OF LETTER:

”In accordance with the Freedom of Information Act, please could HM Treasury give the information requested below regarding the approaching Child Benefit cuts:

The Method of Means-Testing

In an effort to reduce the fiscal deficit, the Chancellor of the Exchequer has decided to withdraw Child Benefit from those he considers to be “the wealthiest 15% of families”. However, he has used a novel method of identifying those families, by considering only the income of the highest earner within a family, and additionally by giving no consideration to the family size.

http://research.dwp.gov.uk/asd/asd5/rports2005-2006/rrep358.pdf

http://www.ifs.org.uk/wheredoyoufitin/about.php

Question 1
Before formulating his original and modified proposals, what analysis did Mr Osborne undertake or commission in order to establish the accuracy of his simplified method of identifying the wealthiest 15% of families by comparison with other more established methods? Please could HM Treasury make available the documents delineating that analysis.

Furthermore, according to this Equivalence Scale, at the income threshold of 60k, which HM Treasury has set for removal of all Child Benefit, a typical 2-child family places around the 75th centile, a 4-child family around the 50th centile, and a 7-child family among the poorest 30% (classified as “the edge of poverty”).

Therefore, in contrast to the Government’s claim that only the wealthiest 15% of families will be affected, it seems that Child Benefit is to be denied to an arbitrary mix of rich families, averagely-off families and families who could be in poverty or close to poverty.

Question 2
Could HM Treasury then, confirm whether they consider Equivalence Scales such as the Modified OECD to be an inappropriate tool for assessing relative household affluence?

If so, could they make available the analysis they undertook which demonstrates that household size is in fact irrelevant to economic need?

Or if not, could they make available the analysis they undertook, of the impact not only on average families, but also of the impact of the Child Benefit cuts on those families whose family size (despite their high income) puts them in the lower deciles on the economic scale?

Question 3
So, could HM Treasury confirm whether or not the Government recognises that certain families above the 50k/60k thresholds are not, in fact, among the wealthiest 15% on account of their family size and/or lack of a second income?
And, if so, could they confirm whether or not any consideration has been or will be given to adding safeguards so that such families would be spared the “clawback”?

Alternative Methods of Raising Revenue from the £50k+ Income Group

According to the Treasury Minister David Gauke:
“Every section of society is having to make a contribution. We can’t pretend that there can be sections of society which we can completely protect from deficit reduction.”

Question 4
Having identified those households with an income exceeding 50k as capable of withstanding a significant income reduction, could HM Treasury please make available an outline of the reasoning that led them to target only those households in that income group that include dependent children, thus exempting child-free households?

In the 2012 budget the Government increased the personal tax allowance, which taxpayers continue to receive at incomes significantly exceeding 50k/60k. At a 40% tax rate, this tax allowance is worth around £4000 (about the same as the amount of Child Benefit a family with five dependent children currently receives). In targeting those in this income group, the Government could have cut the personal tax allowance from around 50k/60k rather than Child Benefit, or they could have simply increased the tax rate. These measures would have affected large families, small families and child-free families equally.

(Single-income households would still have been disadvantaged relative to dual-income households; but although such inequality ought also to be addressed, it is not the subject of this particular FOI request.)

Question 5
Therefore, could HM Treasury please make available the analysis they undertook to compare removal of Child Benefit with other options (including the two mentioned above) for raising revenue from the 50k+ income group:
a) in terms of the impact on the households involved,
b) in terms of the administrative costs,
c) in terms of the amount of additional revenue that could be collected,
d) and with respect to the impact on wider society, in terms of how the withdrawn income would otherwise have been spent by the different types of households (higher income small families; lower income large families; and child-free households, etc)?

Finally, for higher rate taxpayers Child Benefit is the equivalent of a child tax allowance. (It makes little difference to a family whether they receive some of their tax and NI contributions back as a deposit from HMRC as “Child Benefit” or as a higher net income which has had less tax deducted by HMRC.) Either way it recognises the cost and responsibility borne by all parents, and the benefit to society as a whole of investment in the raising of the next generation.

Question 6
Should we conclude then, that in choosing to remove Child Benefit, while leaving the incomes of the child-free untouched (actually slightly increased), the Government no longer considers such investment in the next generation to be of value? Please could HM Treasury cite or make available any reports or documents pertaining to the ideological issues that led the Government to form this opinion.

END

 

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