The child benefit row

Denying child benefit to higher rate taxpayers has caused a media storm and disquiet among Conservative activists and backbenchers, despite the fact that relatively few people are 'unfairly' affected, mainly stay-at-home mums although they are a group close to the heart of some Conservatives.

However, it seems that 83 per cent of voters approve, although that is not that surprising given that around that percentage do not lose out from the proposals: Poll

I think David Cameron made something of an error by appearing to offer a married couples tax allowance as a sop. Admittedly, it is in the coalition agreement, but it was supposed to only apply to basic rate taxpayers and the Liberal Democrats might not like it being extended to higher rate taxpayers.

What this particular disproportionate row does illustrate is the difficult politics of reducing the deficit. Given that this particular measure saves only about £1bn, it appears that stopping child benefit at 16 is still on the cards, as is restricting the availability of bus passes. More generally, we are shifting from a universal welfare state to one provided as a safety net for those in need.

Child benefit concerns

Some concerns are starting to surface among Tory activists about the decision to deprive higher rate taxpayers of child benefit. For example, it is being pointed out that households with a stay at home mum with the husband in the higher rate tax bracket could lose out. Next door a working mother with both parents in the basic rate bracket could be earning more and would keep their child benefit. However, tax returns are made by individuals, not by households and changing this would be a much bigger blow to better off households, apart from being open to criticism as sexist.

The real problem here is that the higher rate of tax in Britain cuts in at a relatively low level. Nothing can be down about that at the moment, but it might be possible to increase the threshhold by 2013 when the child benefit changes come in.

Some tweaking of the proposal may be politically necessary, but the underlying principle is that those on low incomes should not be taxed to make a transfer payment to those on higher incomes.

Higher rate taxpayers to lose child benefit

George Osborne has announced that child benefit will be withdrawn from higher rate taxpayers from 2013: Child benefit . (Incidentally, one would think the Telegraph would know the difference between 'principal' and 'principle').

Universal benefits of this kind cost a huge amount of money, although they also underpin support for the welfare state from the better off part of the population.

Of the various options that have been discussed so far, this is a more equitable move than stopping child benefit at 16 or restricting it to the first two children (the latter would particularly hit poorer families).

It will be interesting to see whether there will now be restrictions on the winter fuel payment or bus passes. One has to remember that a lot of older votes are Conservatives and they have a high rate of turnout.