Child benefit to be scrapped for higher taxpayers
Child benefit is to be axed for higher rate taxpayers from 2013, Chancellor George Osborne has announced.
He told the BBC it was a "big decision" but "absolutely necessary" as it would save £1bn a year at a time of extreme pressure on government finances.
Any couples where one parent earns about £44,000 - roughly the 40% tax level - and above will be affected.
But critics said single parents and couples on relatively modest incomes would be penalised.
Currently child benefit is paid to 7.7 million families with children, costing about £12bn a year.
Ministers estimate the change will affect about 1.2 million families.
The coalition says big reductions in expenditure are needed in nearly all areas of government, if it is to bring down the budget deficit.
Mr Osborne said: "It's very hard to justify taxing people on much lower incomes in order to pay the child benefit to some of the better off in our society."
He confirmed the cut would hit homes with a single or two high earners but families with two parents on incomes up to £44,000 - which might add up together to over £80,000 - would keep the benefit.
The chancellor defended this by saying his plan was "the most straightforward" option - which would avoid across the board means testing.
'In it together'
"It's not a decision we've taken lightly," he added.
"But given the scale of the debts Labour's left us with, and given they've left us with no plan and we've had to come up with proposals, we think this is fair.
"It means we're all in this together. Each part of society is going to be making a contribution"
At the moment, parents are paid £20.30 a week for the eldest child and £13.40 for subsequent children, with payments continuing until the age of 19 for those in full-time education.
Families with three children who will no longer be eligible to receive child benefit face being £2,500 a year worse.
The chancellor insisted this was a "one-off" measure and did not mark the end of the principle of universal benefits which have underpinned the welfare state for decades.
Under the proposed changes, a family where both parents are earning just under £44,000 will continue to receive child benefit while a family where only one person is working and whose income is just above £44,000 will lose the payment.
Asked whether this was an anomaly in the proposal, Mr Osborne said the alternative was to introduce a "complex" system of means testing where all households had their incomes assessed.
People will be expected to declare on their tax returns whether they fall within the 40% and 50% tax brackets and the money will then be clawed back through the tax system.
However, Mr Osborne urged top-rate taxpayers to stop claiming child benefit altogether, saying this would be the "most sensible" thing to do.
BBC political editor Nick Robinson said the government's move amounted to a middle-class tax rise that would directly hit most delegates at the Conservative conference.
He said that this reflected the contradiction that, while the party was delighted to be back in government, it was having to come to terms with the reality of the painful decisions facing the country if it was to meet its objective of eliminating the structural deficit within five years.
Mr Osborne announced in June's Budget that child benefit would be frozen for three years.
Although the 40% tax rate currently takes effect for those on annual incomes of £37,401, once the £7,000 annual personal allowance is taken into account, the figure rises to more than £44,000.
But critics say the move will further penalise people on relatively modest incomes.
"They're not people who are rich," said Paul Noon, general secretary of the Prospect union.
"They are people who pay their taxes, they are people that work hard and need this sort of income to keep families together and support children."
Martin Narey, chief executive of Barnardos, said the charity "bitterly regretted" that child benefit would be cut but it understood the government could not ignore the expenditure.
"If child benefit has to be cut, and we regret that it has to be, it should be done on the basis of income. People who earn more money should lose child benefit," he told BBC Radio 4's Today programme.
However, he added cutting benefits for older children could be "catastrophic".
"There are already many families living in poverty where dad and mum are in full-time work, they have teenage children, very many of them still a long way from a reasonable living standard.
"To take away child benefit from them just because their kids are 14 to 15, would be foolish and very damaging. It would certainly plunge many more families into poverty."
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