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Does a Conservative-led Government really want to make our tax and benefit system the least family-friendly in Europe?

By Paul Goodman
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While editing ConservativeHome recently, I noticed an intriguing difference in the same story.  The Daily Mail reported that the Government wants to pay workless families child benefit for their first two children only: the Independent said that the plan would apply to all families.  On the one hand, most other papers took the same view as the Mail.  On the other, the Independent's Andrew Grice, who wrote the paper's story, knows what he's doing.  I suspected at the time that the Treasury, which has long opposed universal child allowances, was on manoevres.

So it seems.  My old Shadow Treasury team colleague David Gauke was out and about last week, describing those who oppose the Government's present plan to remove child benefit from higher earners as "financial nimbys".  Mr Gauke, now transposed to the Treasury itself as a Minister, has since, as the Daily Telegraph reports today, dropped a hint that the Government may indeed now go further and remove child benefit from all families with more than two children.  There is plenty of off-the-record Treasury briefing to back the story up.

I favour the removal of child benefit from higher earners as a temporary deficit reduction measure, provided the change is practictable and fair when implemented next year.  (Jill Kirby has raised some serious problems with the plan on this site, and Mark Field has flagged up some possible unexpected consequences.) It is reasonable for higher earners to play their part in balacing Britain's books.  But a temporary expendient is not the same thing as permanent change.

Peter Hoskin looked at child benefit in the context of universal benefits last week.  One universal payment, of course, isn't the same as another: an allowance for one's taxable capacity in the tax system isn't the same thing as a payment to help cover the costs of winter fuel.  As Andrew Lilico and I never tire of pointing out (try here and here), child benefit is the former - originally a tax allowance claimed mostly by fathers, it became in the 1970s a universal payment made mostly to mothers.  It is not a welfare benefit.

Most of our European neighbours provide tax help for families with children - or, to be more specific, to married families with children.  One enduring national stereotype is that the British love animals but hate children.  This may have held true once, and the incomprehension with which some people greet the claim that the costs of a child should be treated by the tax system in a different way from the purchase of, say, a IPad may appear to prove it.  But I suspect that if it the claim was ever true, it is no longer (as the horrible Savile drama is proving).

A Government that removes child benefit from larger families would be removing tax support for those families.  Removing tax support for those families would mean lessening the incentive to have more than two children.  Fewer families having more than two children means, sooner or later, a smaller workforce.  A smaller workforce means later retirement or higher immigration, unless it is suddenly and unexpectedly to become more productive.  It is true that were more women to enter the workforce, the problem could be to some degree ameliorated.

It is also true that removing child benefit from families with more than two children would encourage that to happen.  But be warned: tweaking the tax and benefit system to get more mothers to work in the labour market - rather than give them more choice over whether or not to work in the labour market - means more big taxpayer-subsidised childcare schemes, of the kind Nick Clegg tried out this morning.  Does a Conservative Government really want to make our tax and benefit system the least family-friendly in Europe?


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