Every single cut is going to hurt someone. And nobody likes the ones that hurt them. I have a daughter and another child on the way. At conference today we got the news that the Child Benefit of 80ish quid we get each month is going to be stopped. We’re far from rich but as a top tax-band family we are certainly very comfortable – I couldn’t look anyone in the eye and say that we either need or deserve that money. It’s one we’ll just take on the chin in good spirit.
I suspect I’ll be in the minority in my acceptance though. The Government is living its promise to do the right thing rather than the popular thing – and I suspect that this will be wildly unpopular.
One genuine issue that people have been quick to highlight is that there is one group who this will impact more than others: This is single income families who earn just over the threshold. They lose the benefit whilst families with a double income of salaries just less than the upper threshold retain the benefit. In the very worst case example a couple who both earn 43k and so have a family income of £86k will keep the benefit, the single income family earning a fraction more the £44k will lose the benefit. This anomaly is manifestly not equitable.
That said, people who are getting on some very high horses about this need to take a step back and reflect – this same anomaly has existed for years (including the entire 13 years of Labour rule) in that marginal rates already led to the same unfairness via income tax. In the exact same examples above the couple with the single income has already been walloped at 40% for every extra pound they bring in, while the double income couple have only been banged for 25%. I make the point to give context rather than as a justification. Two wrongs don’t make a right – and obviously this new anomaly adds insult to injury for those people.
The anomaly aside (and by very definition any anomaly is an exception to the norm) George Osborne has still done the right thing. He was between a rock and a hard place – to correct the anomaly and move to a solution that took total house-hold income/means-testing into the equation would have added an administration nightmare – more forms, more IT systems, more opportunities for fraud all of which would eat away at the savings to be made – and the savings after all are the whole point of the move. The solution adopted is pragmatic rather than perfect. It can be very easily be implemented with existing tax data. Those people with double incomes just below the threshold should think of themselves as accidental winners rather than single income families just above it thinking of themselves as targeted losers. The principle that high income earners do not require welfare support from the state is sound.