Cameron and Osborne seek to close down the row over child benefit cuts

By Jonathan Isaby

Many of this morning's front pages were dominated by reports of angry reactions to the announcement yesterday by George Osborne that from 2013 child benefit will not be given to households which include a higher rate taxpayer.

I spoke to a number of MPs last night who were very concerned about the announcement, in particular the way that it seems to penalise those households with a single earner just into the higher rate whilst double income households with both parents at the high end of the standard rate would continue to receive child benefit.

David Cameron went out to defend the decision through a round of TV and radio interviews this morning (a rarity since leader's conference interviews are rarely conducted the day before their big speech) - see his encounter with Adam Boulton, for example.

Chancellor George Osborne then sent a letter to the entire parliamentary party, defending his proposal and answering some of his critics. Paul Waugh has the full text, but here's the key passage:

"As I said in my speech, I understand that most higher-rate taxpayers are not the super-rich, but at a time like this it is very difficult to justify taxing people on lower incomes to pay £1 billion in benefits to households that contain higher rate taxpayers. To put this saving in context, in the Budget I made £11 billion of savings from other parts of the welfare system, many of which affected people on lower incomes.

"I know some have pointed out that this approach will leave households that do not contain a higher rate taxpayer, but whose joint income is above the higher rate threshold, still in receipt of child benefit. The only way to assess these joint income families would be to create a new complex, costly and intrusive means test that would spread right up the income distribution.

"Effectively that would mean abolishing child benefit, which is one of the simplest and cheapest benefits to administer, and bringing every family in the country into a new tax credits system, with families having to provide details of their household income every year. Colleagues will be all too familiar with the drawbacks of Gordon Brown’s tax credits system and I do not believe that would be the right approach.

"It is also important to note that we are not introducing a new principle to the tax and benefit system; at the moment a single earner on £50,000 pays higher rate tax while a two-earner couple earning £40,000 each do not. And as David Cameron pointed out this morning, we should not see this policy in isolation. Other policies contained in the Coalition Agreement will help families, including our commitment to introduce transferable allowances for married couples."

On that last point, the BBC is now reporting that the tax break for married couples will definitely be introduced during this parliament, citing a new interview with the Prime Minister this afternoon in which he says:

"I have always supported the idea of supporting marriage through the tax system, specifically supporting the idea of a transferable tax allowance. The idea of a transferable tax allowance is in the coalition agreement. It's something we would like to do this parliament but I hope you will bear with me as I try to announce one policy at a time."

It remains to be seen whether the media continue to run with the story tomorrow morning; but few MPs have been willing to speak out publicly today on the issue and I get a sense from those with concerns that they feel that there is every likelihood that the damage will be repaired long before the changes are due to be implemented in 2013, and that trying to pour fuel onto the fire on the eve of the Prime Minister's speech is in nobody's interest.

7.45pm update:

Ben Brogan of the Telegraph has just blogged that "the story wasn’t quite sparking", but that David Davis has done an interview with ITV which he senses will stoke up the row. The former shadow home secretary says:

“The aim is right, I am entirely in favour of restricting child benefits for the well off. But the actual practice that is being proposed is unwise. If you’re carrying out a programme of cuts you’ve got to do things that are seen to be fair, and where you have perhaps one family with £80,000 a year getting child benefit and another family on £44,000 a year not getting child benefit that would be seen to be unfair... The aim is fine, the detail needs to be reworked.”