For whose benefit? Take 2

27 Apr

Hate to say ‘I told you so’, but I did….Back in February when the Budget was still a glint in the Quad’s collective eye, the proposed Child Benefit changes were already causing a stir.  I wrote about the problems presented by the ‘cliff edge’ of  Child Benefit withdrawal;   the ‘anomaly’ of dual-earning couples where each partner earned just under the threshold maintaining a benefit which single earner-households earning just over it would lose; the cost of monitoring income changes compared to keeping a universal benefit.   A curious mix of costs and (dis)incentives which ignores the fact that Child Benefit recipients live in families, whilst being treated as ‘individuals with children’.

What has happened since is predictably messy.  To address the ‘cliff edge’ issue whereby all Child Benefit would be taken from households as soon as one parent earned over the threshold (initially set at just under £43,000) the Government has set the threshold higher (£50,000) and decided to taper the amount of Child Benefit received for those earning between £50,000 and £60,000 – earn over £60,000 and entitlement disappears.  In replacing the cliff edge with a downward slope of amount of benefit received, the Government has given its administration a costly mountain to climb.

Where children (and let’s remember this is Child Benefit, not Mother Benefit as some seem to argue) live in couple-headed households, and at least one parent earns between £50,000 and £60,000, they will now have to tell the taxman their income and number of children so that the correct amount of individual tax and Child Benefit is paid.  Incomes and living circumstances have an awkward habit of changing, so the taxman will have to keep up a state of constant vigilance to allocate Child Benefit correctly.  Where couples split up, or a Child Benefit recipient moves in with a high-earner, each will have to disclose their circumstances honestly to one another and the taxman.   Sound like an admin headache?  Thought so.  When it comes to relationships and finances, things quickly get complicated – as recognised in the House of Commons Library Briefing on this subject.  ‘It’s complicated’ tends to become ‘It’s costly’.  But then we knew that, didn’t we?

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