George Osborne, child benefit and the Conservative hard-right 2010-7

Hard-right chancellor of the exchequer George Osborne (2010-6) used the 2008 financial crash to reduce some British welfare payments. His ideological austerity programme was combined with political pragmatism. Child Benefit, which is paid to mothers as a tax free sum, was a universal benefit which Osborne felt was inefficient. Osborne recognised that child benefit was a political minefield. His targeting of child benefit was subtly devious. The original proposition was the erosion of child benefit by de-linking inflation from the annual upgrade. However inflation didn’t erode value sufficiently quickly so he tinkered with eligibility criteria. He began with removing child benefit for the high-earning families and then deleted child benefit altogether for mothers who had three or more children. Osborne’s policies affected poor mothers most but he dismissed that problem, calculating they wouldn’t vote Conservative anyway.

Osborne reduced the value of child benefit by stealth. He hoped inflation would work its corrosive magic. Osborne froze cash payments at 2010 levels. This was less successful than he hoped as inflation dropped to zero in 2015 thereby retaining the value of child benefits. Osborne’s incompetence led him to look for other mechanisms to achieve the reduction of the cost of child benefit to the Treasury. As a hard-right devotee of J S Mill he actually objected to any welfare payments but the 21st century political narrative meant that he had to accept them as a fact of life. The drive for alternatives forced him to look at eligibility criteria.

By 2016, the value of child benefit for two child families was reduced by £294 per year because of inflation. Poorer families began drifting into poverty, whereas middle-class mothers saw £294 as the price of a weekly bottle of wine. Emboldened by unexpected political acquiescence Osborne challenged the principle of universality. Believing high-earning families on a thousand pounds a week didn’t ‘need’ child benefit, he proposed capping benefit at that figure. Unfortunately for Osborne, middle-class mothers saw child benefit as an entitlement. A political storm was unleashed led by the staunchly conservative Daily Telegraph*. Pragmatism triumphed. Osborne introduced a taper beginning at £50,000 a year which concluded when £60,000 a year was reached.

Child benefit is demand led. More children necessarily increases the child benefit bill. Osborne felt that child benefit incentivised mothers to have large families so he set about altering eligibility. From 2017 child benefit is only payable to mothers having two children or fewer. (Those already in receipt of child benefit will continue to receive it but there won’t be payments to new three+ children families.) The demographics of Britain means that two principal groups are affected by this: the very rich and poor immigrant families*. The very rich don’t get child benefit so that leaves immigrant mothers. For them the drift into poverty is going to be accelerated unless they are weaned off larger families and come into line with the general British population. This could be interpreted as ecomonic racism. If Osborne isn’t morally deformed by attacking poor immigrant families then a plausible explanation is that we have yet another example of his incompetence.

Child benefit is a vital building block in the well-being of our children. Mothers are paid by the state to provide a decent start to every child in Britain. For the poorest families, child benefit is a crucial part in the total family revenue. Only a hard-right Conservative politician could believe that an ideological principle trumps social justice.

ADDENDUM

The Daily Telegraph 6th January 2013 not only offered advice on mitigating the impact of the changes in child benefit describing it as a ‘tax’.

“Salary sacrifice

If your employer runs a salary sacrifice scheme, you can use it to replace taxable earnings with non-taxable benefits, such as childcare vouchers. Alternatively, you could ask your employer to reduce your salary but make up the difference in your workplace pension scheme.

This could reduce your salary to less than £50,000, entitling you to full child benefit.

Pension contributions

If you earn £55,000 and make £5,000 of pension contributions, you will decrease your taxable income to £50,000. This means you will be eligible for the full child benefit and have more money saved for when you retire. Paying money into a pension means you also benefit from a reduced income tax bill. You cannot normally access the funds before you reach 55, however.http://www.telegraph.co.uk/finance/personalfinance/tax/9781037/Child-benefit-how-to-beat-the-tax.html article by Jessica Winch 6th January 2013

*http://www.telegraph.co.uk/news/uknews/immigration/11806379/End-of-2.4-children-as-Britain-has-biggest-families-in-Europe.html

Chris

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