Child Benefit Cuts for Wealthier Families Are Likely in the UK

Those Middle Class parents in the UK who decide to stay at home and look after their children because of the level of child benefit that they receive might soon be worse off and have to look for work if the Chancellor, George Osborne has his way.

As part of an overhaul of the Benefits System in the UK, the plan is to reduce or eliminate completely the amount of child benefit that is paid to higher rate taxpayers, saving an estimated One Billion Pounds a year and affecting 1.2 million families.

While there is no system that can keep everybody happy, and there always have to be winners and losers, the hard fact is that too many people in the UK are able to claim benefits and avoid working, which as a result is costing the government billions of pounds a year.

The way that the revised child benefit system is designed to work is based on individual incomes, not combined incomes, which will affect those families that have only one person in work far more than those which have two breadwinners.

As so often happens, those who are earning just above the threshold may lose out substantially, compared with those who are earning just below the threshold. For example, a working couple who both earn £44,000, a total of £88,000, would be able to keep their benefit, however a family with a single person earning £45,000 would lose their child benefit.

The current rate of child benefit is a flat rate, irrespective of what the household is earning, and is £20.30 a week for the first child, and then an additional £13.40 for each of the other children in the family, which for a mother of three children adds up to a cost of £2,500 a year.

In a speech today at the Conservative Party Conference in Birmingham, the Chancellor likened the huge deficit that the Labour Government left the country with to like owing money on a credit card.

"The longer you leave it, the worse it gets. You pay more interest. You pay interest on the interest. You pay interest on the interest on the interest.".

The government are also looking at cutting other benefits based on income, which include winter fuel allowances, and free bus passes, which are both a lifeline for many of the elderly people living in the UK.

One of the primary changes that are being looked at with the overhaul of the benefits system in the UK is to review the unemployment benefits and to try to get people back to work, rather than continue to create a society where many families don't have a single person working, with all living off benefits and also getting free housing.

For one the author is looking forward to these latter changes, as it is frustrating to all taxpayers to have to work hard, yet see so many people never having to work, and often having more money available to spend.

More details of the proposed changes to the benefits System are expected to be announced in a White Paper in the next couple of months.

Sources:

The Daily Telegraph