High Income Child Benefit Charge (Report to Parliament)

Jim Shannon Excerpts

1st reading
Tuesday 18th July 2023 Commons Chamber

[Jim Shannon (Strangford) (DUP)]

I beg to move,

That leave be given to bring in a Bill to require the Chancellor of the Exchequer to report to Parliament on the likely effects of increasing in line with inflation the income threshold for the High Income Child Benefit Charge and of determining that threshold by reference to household income instead of individual income.

I thank the House for allowing me to present this ten-minute rule Bill. Given the timescale, I will attempt to be succinct: most Members of the House will have an understanding of why I, the Democratic Unionist party, and others seek to present this Bill today. It is in the interest of fairness, something that is always critical—always key—to everything I do.

The high income child benefit charge is equal to 1% of a family’s child benefit for every £100 of income that is over £50,000 each year. If an individual’s income is over £60,000, the charge will equal the total amount of the child benefit. That is how it is worked out—indeed, that is how it has been worked out since its introduction in January 2013, with not one single change. The fact that the threshold for the charge has remained unchanged for 10 years is incredible, and not usual when it comes to Government thresholds. Even the standard personal allowance for tax has risen by almost a third during the same period. In the interests of fairness, I should note that income tax thresholds have been frozen in cash terms since 2021-22 and it is Government policy that they will remain frozen up to and including 2027-28, but in tandem with the child benefit freeze, that means that working families find themselves even harder pressed to pay the bills.

The question of why we are now faced with an immovable child benefit threshold is difficult to answer when we consider that literally every other rate has fluctuated over that timespan. The cost of the diesel that people need to get to work is up by 30p a litre since 2013—well over 20%—while those who invested in electric cars have seen the price of electricity consumption increase from an average of £577 in 2013 to the current price cap of £2,500. Increases are not limited to those essentials: using the consumer prices index measure of inflation, the tremendous staff of the Library have worked out that average prices in the UK rose by 25.9% from tax year 2013-14 to 2022-23. Let us take a moment to take that in—an increase of 25%. That is substantial, and wages have not increased at the same rate. A family’s wages may well have increased, yet they are worse off because the bills they are paying cost 25% more. That wage increase may in turn preclude a child benefit claim, yet it is clear that, for working families, child benefit is more necessary than ever before.

The question that the Treasury will be working out is this: what would the thresholds be if they were uprated with inflation? As Treasury Ministers are aware, the usual practice is that income tax thresholds are uprated based on the annual inflation rate of CPI in the September prior to the start of the coming tax year: for example, the threshold in tax year 2023-24 is determined by CPI inflation in September 2022. Based on that practice, if the thresholds had been uprated in line with CPI inflation, the lower threshold of £50,000 in 2013-14 would be £62,644 in 2023-24, and the upper threshold of £60,000 in 2013-14 would be £75,173 in 2023-24. That is what the thresholds should be, but they are not—we find ourselves in a substantially different position. That is one of the reasons why I have tabled this ten-minute rule Bill.

The Government are aware of the issue; indeed, the Minister and I have spoken about it before. She is always very generous in her replies, although not always with the answers I was hoping for, hence why I have tabled the Bill. I have raised the issue during Budget debates and other debates in Westminster Hall, and the Minister was quick to highlight that the charge affects a small proportion of child benefit claimants, namely those who have relatively high incomes. I think we have established that the threshold is nowhere near the same rate that people were allowed to earn when the charge was designed in 2013, so the Government must answer the question of whether it is a stealth tax on the working middle class—who cannot be classified as rich by any stretch of the imagination—or to ensure that those who do not need help do not get it. The rationale behind applying a child benefit threshold has been terribly blurred by the refusal to uplift that threshold in line with inflation, or indeed with common sense.

The Minister has previously said that, in 2019-20, only about 373,000 individuals in the UK declared a HICBC liability, and the vast majority of those individuals had incomes above the UK higher-rate income tax threshold of £50,270. The inference is that those people are rich and do not need help, which is quite untrue. With a CPI increase of 25%, that argument does not carry weight for the family who paid £98.15 per week for 25 hours of childcare in 2013, but who now pay £285.31. That is the inflation—that is the CPI—that is the problem. If that family earn £50,000, they certainly do not get child tax credit to help them. Those people are in ordinary jobs, trying their best to make their mortgage payments, heat their home and educate their children, without one penny from Government over their child benefit.

Since HICBC was introduced, His Majesty’s Revenue and Customs has also carried out compliance checks on those who either did not register for self-assessment to pay the charge, or paid the incorrect amount on their self-assessment tax return. We started off with a few thousand people being over the threshold, but the number has escalated to 61,881 checks on those not registered for self-assessment and 63,713 checks on those who returned the incorrect amount in 2019, before the pandemic. That is not a few families. The scale of those compliance checks illustrates the difference between the time when the charge was introduced, in 2013, and the number of people who are now expected to fill out a self-assessment form without training or guidance. They may even be paying an accountant to get it right for them, due to their fear of getting a fine or a black mark.

The Bill also highlights the inconsistency of the fact that a single-income home has a threshold of around £50,000, yet a couple in a dual-income household could be earning £49,000 each—that is £98,000 in total—and still receive their entitlement. Again, this shows the inconsistency of the Government approach, and the reason that this House must, I believe, take the time to review the matter and get it right.

Our middle classes are struggling. They are the ones—in every one of our constituencies, including the Minister’s, represented in this place—working hard, raising their children and trying to give them opportunities in their life, while all around them prices have sky-rocketed. They are the ones who are discovering how difficult it is to make ends meet, and who realise that, if they gather their courage to ask for a reasonable pay rise of a couple of thousand pounds, most of it will be lost in tax and that, with the missing child benefit, the struggle will continue and they will be no further ahead. They are the ones that our party’s ten-minute rule Bill is advocating for—for help and for change. We have determined that there is a minimum amount that people must have to live and to fill the gaps. I cannot for the life of me fathom why the only group of people we do not seek to give a hand up to are the working backbone of this country—and the backbone, by the way, of every one of the parties here as well.

The sum of £50,000 is not what it used to be. Some people will say, “Well, actually, if only we had that”, but it is the threshold I am referring to. We know that the value of money has changed. That is why everyone who would have earned £65,738 in January 2013, when the charge was introduced, now earns almost a third more, which is still not embraced by the Minister and by the Department. Times have changed, and so too must the child benefit threshold. I today lay this Bill before the House for consideration.

Question put and agreed to.

Ordered,

That Jim Shannon, Sir Jeffrey M. Donaldson, Gavin Robinson, Sammy Wilson, Carla Lockhart, Mr Gregory Campbell, Paul Girvan, Ian Paisley, Margaret Ferrier and Tim Farron present the Bill.

Jim Shannon accordingly presented the Bill.

Bill read the First time; to be read a Second time on Friday 24 November, and to be printed (Bill 356).

[Mr Deputy Speaker (Mr Nigel Evans)]

As the House knows, the House of Lords has accepted all of the Commons amendments and disagreements to Lords amendments that this House sent to the Lords on Monday evening and, accordingly, there are no more proceedings on the Illegal Migration Bill.

We now come to motion 3 relating to Business of the House (Today). I call the Whip to move the motion in an amended form, leaving out paragraph (2).

Business of the House (Today)

Ordered,

That, at this day’s sitting—

Standing Order No. 41A (Deferred divisions) shall not apply to (a) the Motions in the name of Secretary Thérèse Coffey relating to Environmental Protection and (b) the Motion in the name of Secretary Chloe Smith relating to the Online Safety Bill: Carry-Over (No. 2).—(Steve Double.)

Northern Ireland Troubles (Legacy and Reconciliation) Bill: Programme (No. 3)

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the Northern Ireland Troubles (Legacy and Reconciliation) Bill for the purpose of supplementing the Orders of 24 May 2022 (Northern Ireland Troubles (Legacy and Reconciliation) Bill: Programme) and 29 June 2022 (Northern Ireland Troubles (Legacy and Reconciliation) Bill: Programme (No. 2)):

Consideration of Lords Amendments

(1) Proceedings on consideration of Lords Amendments shall (so far as not previously concluded) be brought to a conclusion two hours after their commencement.

(2) The Lords Amendments shall be considered in the following order: 20, 44, 1 to 19, 21 to 43, 45 to 118, 120 to 129 and 119.

Subsequent stages

(3) Any further Message from the Lords may be considered forthwith without any Question being put.

(4) The proceedings on any further Message from the Lords shall (so far as not previously concluded) be brought to a conclusion one hour after their commencement—(Steve Double.)

Question agreed to.