Child Benefit

Gary Streeter Excerpts

Tuesday 22nd May 2012 Westminster Hall

[Mr Gary Streeter (in the Chair)]

There is obviously a lot of interest in this important debate. I have the power to impose a time limit, but I will not do so from the outset—let us see how we get on. However, a little self-restraint by colleagues would be most appreciated.

[Roberta Blackman-Woods (City of Durham) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Streeter. I thank Gingerbread, the Child Poverty Action Group, the Institute of Chartered Accountants in England and Wales and the House of Commons Library for producing excellent briefings for today’s debate.

Eleanor Rathbone, the great advocate for family allowances, which we now know as child benefit, entered politics in 1909. It is extraordinary that, more than a century later, we have once again had to secure a debate in Parliament to champion the basic principles of child benefit. There have been threats to child benefit before, but since 1945 when family allowances legislation was introduced—a watered-down version of the child support that Eleanor Rathbone and others had campaigned for—only the coalition Government have introduced legislation for the demise of the principle of universality that underpins child benefit.

Not everyone on the Government side is happy with the proposed changes, as demonstrated by the lack, bar one or two, of any Back Benchers on the Government side who wish to take part in this debate. In an earlier debate, the hon. Member for Christchurch (Mr Chope) pointed out that the Government’s proposals ask those on higher incomes with families to contribute more, while those on higher incomes without children are not asked to contribute more. I do not see how that can be fair. I do not usually quote from the hon. Gentleman, especially in agreement, but he has hit the nail on the head.

I would like to concentrate on two issues: the destruction by the Government of the universal principle, and the unfairness and unworkability of the proposed changes. The principle long established and supported on a cross-party basis is that society as a whole should contribute towards the upbringing of children, because we all share in the benefits of a properly supported future generation. Arguing for family allowances, Eleanor Rathbone captured that exactly:

“Children are not simply a private luxury. They are an asset to the community”.

The logic of accepting that view is that in a properly functioning society transfers are made to families with children—not away from them to pay for tax cuts to millionaires.

Her Majesty’s Revenue and Customs recently put out a press statement on the proposed changes, which told us that the Government’s plans for changing child benefit are legal. I have been in the House for a number of years and I am not familiar with Government Departments telling us that policy changes are legal. I can only imagine that it must reflect a measure of concern about the Government’s incompetence that Departments have taken to doing so. My concern, however, is not about the legality of the proposed changes, but that they are wrong and should not happen.

The CPAG has summarised the benefits of child allowances. They achieve horizontal distribution between families, from those without children to those with children, life-cycle redistribution—most people have children at some point and we want to help whenever families are most pressed—and intergenerational redistribution, and they place a value on all children. For those reasons and many others, the benefit should be kept in its universal form. The changes are grossly unfair and probably unworkable.

The ICAEW has branded the legislation seriously flawed in principle and in practice. It points to many problems and I will highlight a few. HMRC will be using the tax system to claw back from one individual a benefit paid to the other, which could be extremely difficult as families in similar situations will be treated differently. Despite the introduction of the taper, the changes could still lead to a huge disincentive for individuals to earn more. The worst aspect of the proposed changes is that a family with a single earner who has an income of more than £60,000 is significantly worse off through the withdrawal of the benefit, while two-earner couples with incomes of up to £50,000 each will not lose the benefit.