The coalition government has confirmed that it is revising its plans to cap child benefits from higher rate taxpayers who earn above £42,735. While the treasury maintains that it is a popular move, the legislation has attracted opposition from across the political spectrum.
The threshold has been criticised and branded ‘unfair’ as two earners in one household taking home £40,000 each will not be hit by the cut; but a single earner taking home £43,000 will be hit. Labour has criticised it because it will deeply affect ‘stay-at-home-mothers’. The legislation is also attracting opposition from the conservative’s own backbenchers, as many say that the ‘cliff-edge’ threshold is unfair. Nick Clegg acknowledged that the case above is an anomaly and that the coalition is looking into ways in which this issue can be resolved. The Daily Telegraph reports that, under plans from George Osborne, the threshold will now be raised to £50,000. But Tory rebels warned that this revised plan would not tackle the ‘unfairness’ that they are citing for their rebellion.
Back in 2010, when original plans for a child benefit cut were drawn up, David Cameron attempted to justify the cut, saying that it’s “tough, but it’s fair” and necessary for tackling the deficit. Last month, the institute for Fiscal Studies estimated that the cap would save the treasury around £2.4 billion in 2013-2014.
The government will be further criticised later this week when the Child Poverty Action Group launches its campaign against the cap on benefits for high earners. Analysis by the group predicts that parents with three children born after the cap would lose out on up to £44,000 in total.
However more importantly, in the Commons on Monday Labour predictably called for a review, warned that a single-earning family on £43,000 with three children would be £2,450 a year worse off and claimed that government ministers were in “total disarray”. Stewart Jackson, Conservative backbench MP for Peterborough, told his party’s ministers that if Labour votes against the motion, it would be defeated. In simpler terms, this means he believes that the number of Tory rebels to the cap on child benefits exceeds the coalition’s majority. Nick Clegg conceded that a rethink is under way but Justice Secretary Kenneth Clarke told news reporters that it was “ridiculous” to suggest the Government would do a U-turn.