Child benefit cuts will result in a worse deal for the poor

Today’s Guardian reports that the new Lib Dem/Tory Chancellor George Osborne has made plans to cut spending on child benefit by ‘targeting’ the benefit.

Today’s Guardian reports that the new Lib Dem/Tory Chancellor George Osborne has made plans to cut spending on child benefit by ‘targeting’ the benefit: means-testing it to exclude the ‘middle classes’; child Benefit is a large item in the Government’s budget, costing about £11.5 billion a year – but means-testing it is likely to save less than ministers may hope.

As a universal benefit, it is very cheap to administer, but means-testing would require hundreds, possibly thousands of extra staff and a new IT system. The cost varies, but in previous years administration has cost about 1 per cent of the spending on the benefit itself. The need for new IT would also mean that this policy would be hard to introduce quickly.

Another reason why the policy might not be the terrific wheeze some imagine is that children are concentrated at the bottom end of the income distribution. Only 13 per cent live in families in the top fifth, 73 per cent in the bottom three-fifths. Saving billions would require cuts that hit people who would certainly feel the loss – £20.30 a week is a big item for most families.

Child benefit is a vital element in any anti-poverty programme. Take up rates are around 97 per cent, compared with 81 per cent for child tax credit, the nearest means-tested equivalent. This is important because the people most likely to miss out if child benefit is restricted to the poorest are those who find it difficult to deal with the complex forms that are an unavoidable feature of any means-tested provision.

We know that shame and stigma are terrible aspects of poverty. Repeatedly, people in poverty say that being excluded from the mainstream and the lack of respect they experience every day are as bad as the stresses and strains of coping on a low income. Universal benefits are a badge of citizenship; there is no shame in claiming what everyone else can get as well. Means-tested benefits are a badge of poverty, claiming them is a necessity, but it never makes anyone feel good.

One interesting aspect of this story is that it reveals how difficult it will be to embarrass ministers in the new government when they go back on promises made in their manifesto or during the campaign. There was no mention of the policy in the Conservative manifesto and Philip Hammond, speaking for the Conservatives on Newsnight in the middle of the election, specifically ruled it out. Normally one would expect a decent interval before such blatant reneging on a commitment, but the Conservatives can claim that this is a policy they ‘conceded’ to the Lib Dems: on the same programme, Vince Cable insisted that it would not be responsible to rule out the policy.

In fact, it is doubtful whether this really is Liberal Democrat policy: back in September Nick Clegg floated the idea and was immediately squashed by Steve Webb (now a work and pensions minister). Webb really does know his stuff and neither Cable nor Clegg was willing to stand up to him at the time. Now things are different: child benefit is administered by HMRC, a Treasury agency that Webb has no powers over as pensions minister at DWP; he will, however, be prevented from criticising the move by collective responsibility.

Jilly Cooper once remarked that all child benefit meant to her was an extra bottle of Sainsbury’s champagne at the weekend, and politicians in the coalition may imagine that this is all people will miss. But, as I’ve indicated, serious savings will mean hitting people with much lower incomes than Ms Cooper and this may not be an easy policy for the coalition to sell.In October, when the Conservatives announced plans to take tax credits and the child trust fund from middle class families the Daily Mail threw a wobbly, with the headline:

“Better off families to lose tax credits and baby pay-outs”

Families value child benefit, taking it away from the people the Conservatives normally hope to win support from may rouse the back benches. The ‘Fowler Reviews’ of the mid-1980s wisely left child benefit alone, but Mrs Thatcher tried to strangle CB by freezing it – a policy that proved to be tremendously unpopular with Conservative voters. One of the first things John Major did when he became PM was to return to annual uprating of CB – he knew the importance of keeping his base on side.

In the end, I hope that the coalition – and especially the genuine progressives in it – decides to reject this policy. I hope they do so for all the reasons I’ve listed in this article; but I also hope they reject it for political reasons. The advantage of universal benefits is that they build up a common interest in the benefits system. As research for the Fabian Society has shown, there is widespread support for a welfare state built on reciprocity.

Political generosity is at its highest when the system offers something for everyone – and weakened when we divide society into those who pay for welfare and those who receive it. A means-tested benefit system will always be meagre and grudging, because the middle classes will be tempted to believe the worst of those who claim the benefits they are paying for. Far from being a progressive step, taking benefits from the middle classes will result in a worse deal for the poor.

31 Responses to “Child benefit cuts will result in a worse deal for the poor”

  1. House Of Twits

    RT @leftfootfwd Child benefit cuts will result in a worse deal for the poor: http://bit.ly/dji1R4

  2. SSP Campsie

    RT @leftfootfwd Child benefit cuts will result in a worse deal for the poor: http://short.to/2gzlw #ConDemNation

  3. Joshua Fenton-Glynn

    rt @LeftFootFwd Child benefit cuts will result in a worse deal for the poor: http://bit.ly/dji1R4 <good article need coalition to protect CB

  4. Jay Baker

    RT @leftfootfwd: Child benefit cuts will result in a worse deal for the poor: http://bit.ly/dji1R4

  5. kate blagojevic

    RT @MediaActivist: RT @leftfootfwd: Child benefit cuts will result in a worse deal for the poor: http://bit.ly/dji1R4

  6. Stephen Barry

    RT @leftfootfwd: Child benefit cuts will result in a worse deal for the poor: http://bit.ly/dji1R4 @child_outcomes

  7. KatieCurtis

    new guest post at @leftfootfwd: Child benefit cuts will result in a worse deal for the poor: http://bit.ly/dji1R4 (via @touchstoneblog)

  8. gemma tumelty

    RT @touchstoneblog: Richard has a new guest post at @leftfootfwd: Child benefit cuts will result in a worse deal for the poor: http://bit.ly/dji1R4

  9. Gareth Partington

    RT @leftfootfwd: Child benefit cuts will result in a worse deal for the poor: http://bit.ly/dji1R4

  10. Anon E Mouse

    Is this the same Richard Exell who claimed elsewhere that VAT increases were regressive?

    Don’t you have some fee paying union members to be representing instead of wasting your time and their money of this stuff Richard?

  11. joemcmanners

    RT @leftfootfwd: Child benefit cuts will result in a worse deal for the poor: http://bit.ly/dji1R4

  12. Utter Piffle

    RT @leftfootfwd: Child benefit cuts will result in a worse deal for the poor: http://bit.ly/dji1R4

  13. Ell Aitch

    RT @leftfootfwd: Child benefit cuts will result in a worse deal for the poor: http://bit.ly/dji1R4

  14. ToUChstone blog

    Richard has a new guest post at @leftfootfwd: Child benefit cuts will result in a worse deal for the poor: http://bit.ly/dji1R4

  15. Louise John

    RT @leftfootfwd: Child benefit cuts will result in a worse deal for the poor: http://bit.ly/dji1R4

  16. Don Paskini

    RT @joshfg: rt @LeftFootFwd Child benefit cuts will result in a worse deal for the poor: http://bit.ly/dji1R4 <good article need coal …

  17. Elaine

    In the past one of the key arguments -substantiated by research – was that since child benefit is directly paid to women, it had a particularly focussed benefit to children and ’empowered’ mothers (especially those who did not work outside the home) with an independent source of income, which they then used very efficiently on children’s needs. What is the current research on this issue?

  18. Daniel Blaney

    RT @joshfg: rt @LeftFootFwd Child benefit cuts will result in a worse deal for the poor: http://bit.ly/dji1R4 <good article need coal …

  19. Mary Newsham

    Agree that those most likley to suffer worst from means testing would be those who are most in need of the benefit, the educationally weak who find form-filling difficult and who are already at great disadvantage in the world of work.

  20. Web links for 14th May 2010 | ToUChstone blog: A public policy blog from the TUC

    […] Child benefit cuts will result in a worse deal for the poor Richard has a guest post at Left Foot Forward today, arguing that far from being a progressive step, means testing child benefit could hurt poorer families, and might not save as much as hoped. […]

  21. Andrew Curry

    Surprised? Child benefit cuts hurt the poor. http://bit.ly/d899cu And the £10K #tax threshold helps the top 30% most. http://bit.ly/a99QoV

  22. Will Tisdale

    Child benefit cuts will result in a worse deal for the poor – http://bit.ly/d6CSHC

  23. coexist

    RT @nextwavefutures: Surprised? Child benefit cuts hurt the poor. http://bit.ly/d899cu And the £10K #tax threshold helps the top 30% most. http://bit.ly/a99QoV

  24. blogs of the world

    Today's Guardian reports that the new Lib Dem/Tory Chancellor George Osborne has made plan… http://reduce.li/hzli2g #worse

  25. Tax Research UK » Child benefit cuts will result in a worse deal for the poor

    […] Child benefit cuts will result in a worse deal for the poor | Left Foot Forward. […]

  26. Will income inequality pass ‘mitigation’ stage? « My Political Ramblings

    […] came to VAT or NI increase!). But attention should be paid to the benefit situation. For example, Left Foot Forward remark on the problems that making child benefits means tested would cause, interestingly referring […]

  27. june gale

    i warn the conservatives keep your hands off the child benefit , it is our money not yours

  28. Alexander

    I couldn’t disagree more. I was thinking about child benefit today and even managed to bring myself to write a blog post about it (http://www.alexanderamatosi.com/politics/2010/9/13/universal-benefits-should-not-be-universal.html). The money not, as June Gale says, “hers,” it is the government’s and that money needs to go to pay the national deficit resulting from Labour and it’s profligacy.

    Benefits should provide a vital safety net, they are not ‘additional extras’ government give people to make their lives easier –– that is what work and ambition to improve your lot gives you.

  29. Alexander Amatosi

    What stupidity! RT @leftfootfwd: Child ben. cuts will result in a worse deal for the poor http://bit.ly/d6CSHC Right I must be off to bed! x

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