July Budget to slash child benefit?
We already know that much-loved Chancellor George Osborne is delivering another Budget on July 8, one not tempered by upcoming election fears, but what we don’t yet know is what might be contained within that little red box. However, ‘leaked’ reports now suggest that George and Iain Duncan Smith have found a way to shave a further £12bn from the welfare budget- by slashing child benefit
Child benefit was always a universal benefit, paid to everyone with children, regardless of means. However, during the last Parliament, the benefit was withdrawn where one parent earns more than £60,000, and reduced where one parent earns between £50,000 and £60,000. Those earning above the threshold can either disclaim their entitlement, or pay it back on a tax return. Where both parents earn £49,999, the family will receive full benefit.
Currently, for those still entitled, the rates have been frozen at £20.70 per week for the first child and £13.70 for every subsequent child, and it is these figures that the Government is said to be looking to adjust. Mr Duncan Smith, the work and pensions secretary, has apparently been modelling the effects of several different variations of cuts ahead of next month’s Budget. The main proposals are to reduce the extra amount paid for the first child, and to limit the amount of children for whom the benefit will be paid.
The modelling will consider reducing the child benefit paid for a first child from £20.70 a week down to the ‘standard’ £13.70. The Institute for Fiscal Studies (IFS) calculates this would save the Treasury £2.5bn a year-as well as cutting £360 a year from every qualifying family with children.
Another item under consideration, which has been mooted for some time, is plans to cap the number of children for which child benefit is paid. Both David Cameron and Mr Duncan Smith are said to be in favour of a cap at two children, which would save around £1bn a year. Alternatively, a cap at three children could be considered, although the savings would obviously come in at less than £1bn, making a less than impressive dent in the £10.5bn savings the Government has been charged with finding.
The government has already announced plans to freeze working-age benefits for two years and thescrapping of housing benefit for the under-21s. Last week’s Queen’s speech outlined plans to lower the benefit cap from £26,000 a year to £23,000, a move which some say will put an additional 40,000 children into poverty.
But what do you think? A government source says the (unconfirmed) move is “about achieving behaviour change” and that by limiting the amount of children who qualify for child benefit “you send a message where people have to think: can I afford another child?” But is the availability of a little over £700 a year really a paramount consideration in having another child?