James Forsyth

The government’s options for a child benefit tweak

The government's options for a child benefit tweak
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Nick Clegg has confirmed this morning that the coalition is looking at how to tweak its policy of removing child benefit from families in which someone pays the higher rate of income tax. As I wrote in the Mail on Sunday, there are three options being explored.

The first is designed to address the fact that, a family where one parent works and earns £45,000 while the other stays at home raising the children would lose their child benefit while the one next door where both parents are on £40,000 would keep theirs. This change would see families with one higher rate taxpayer lose only half of their child benefit. But, I understand, that this is not the preferred tweak at the moment.

Another possibility is keeping child benefit universal for all children under five. This would recognise that the first few years of a child’s life impose unique costs on families and are when parents need the most help. Again, though, I hear that this option is not top of the list at present.

Late last week I was told that the most likely option was raising the threshold for the policy kicking in so that people who are only just paying higher rate taxes would not lose their child benefit. For simplicity’s sake, the threshold would have to be a round number. The figure I heard mooted was £50,000. But Osborne might go higher than that; Jason Groves of the Daily Mail suggests that £80,000 is being considered as the cut-off point.

One thing is certain, though: the policy will not be dropped. Cameron remains convinced that the policy is key to his message that deficit reduction is being done as fairly as possible. The Tories also know that the £1 billion the policy is meant to save is already in the Treasury’s calculations and if they row back on it, the Liberal Democrats will make them find the money elsewhere.