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The Government mustn't means-test child benefit

by Paul Goodman

Screen shot 2010-10-07 at 12.57.20 Let's be clear about definitions: the Government is proposing to means-testing the payment, in a sense, by removing it from higher rate taxpayers.

As I've written before, I support the proposal as a temporary move to help reduce the deficit.  But the Government should rule out using it as permanent measure to end family allowances.

This raises a question: what's George Osborne's plan?  Will he drop the move when the deficit's under control?

He's been asked that question, and won't answer it.  But Iain Duncan Smith seems to have done so.  In this morning's Guardian, he appears to suggest that child benefit will be rolled into the universal credit - in other words, that it will eventually be paid only to those receiving the new, big benefit.

Whether the report's right or not, the Treasury keeps a beady eye on family allowances, and has been getting at them, or trying to do, for a very long time.  I link again to Gary Gibbon's excellent recent post listing some of the detail.  So a push to means-test Child Benefit permanently looks to be on.  Such a move would mean -

  • More means-testing.
  • A new computer system, presumably, to carry it out.  And we know how well Government computer systems work, don't we?
  • New - and probably higher - administration costs in any event, since the cost of administering means-tested payments is usually more complex than that of administering universal ones (for example, means-tested systems lead to under-payment and over-payment problems).
  • A new poverty trap for couples with children.
  • New disincentives - therefore - to earn.
  • New people (mostly women) caught by the link between less child benefit and smaller pension entitlements.

To be clear: I'm not asking for universal rather than means-tested payments in general.  I am for asking, in each individual case: what's this payment for?

Child benefit is for recognising the costs to families of raising children.  That's what the old family tax allowances were for.  That's what this (mis-named) payment does.  I believe that its purpose is sound.

We rightly slammed Gordon Brown for dragging more and more people into dependency on means-tested benefits.  Why would the facts be different were a Conservative Chancellor to do the same thing?  Child Benefit must not be rolled into the Universal Credit.


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