Why are the Tories offering more public money to people who don't need it?

Why are the Tories offering more public money to people who don’t need it?

Why are the Tories offering more public money to people who don’t need it? Now they’re offering child benefit to people on six-figure salaries.

Apparently this is to make it fairer as they transition the benefit from being based on the income of the highest-earning parent to being based on that of households.

In practice, this does not work.

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The BBC tells us,

Currently someone is eligible for the benefit if they are responsible for raising a child who is under 16, or under 20 but still in education or training.

Parents receive £25.60 per week for one child and £16.95 for each additional child.

The benefit begins to be reduced once one parent earns more than £60,000 and is removed entirely for an income over £80,000 – a deduction called the High Income Child Benefit Charge (HICBC).

This has created a situation where a household with two parents earning £60,000 each get the full amount, while a household where one parent earns just above £60,000 would see their benefit reduced.

If household income becomes the new yardstick, then the full amount would be awardable to one with two parents who have a combined income of £120,000 – and also to any one-parent families where the single parent earns up to £120,000 on their own.

This Writer would say this undermines the principle of means-testing the benefit.

The idea behind restricting it, back in 2013, was to withhold it from people who could afford to be without it.

The proposed change would mean only 12 per cent of families would now have child benefit reduced or denied them. That’s still 900,000 – but the Institute for Fiscal Studies has said this means it may not be worth having the extra administrative staff and apparatus to impose any restrictions at all and the government might as well return child benefit to being universal (see the BBC article).

This would cost £1.5 billion more per year than the Tories’ planned changes. The article does not state how much is spent on administration so it is impossible for This Writer to judge whether making child benefit universal again would be cost-effective.

So the issue is perceived hypocrisy; the Tories said they would restrict child benefit to poorer families who needed it, and now they want to give it to people with six-figure salaries while other parents who earn only slightly more than half that will have their entitlement reduced because, combined with their partners’ salary, it will push their earnings above the threshold.

This is the problem with means-testing. It is very rarely fair – but Tories use it anyway and rich people often benefit from it in spite of the stated intent.

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