PRESS RELEASE - CARE welcomes the Chancellor’s announcements in the Budget today that he will first raise the threshold for the withdrawal of child benefit to £50,000 and subsequently withdraw the benefit gradually between £50,000 and £60,000 to avoid a “cliff edge”. Serious problems remain however. The proposals are still not “fair”, as the Chancellor claimed they would be.

One-earner families, both couple and lone-parent families, benefit much less than two-earner couple families. Simply raising the threshold for withdrawal does not remove this anomaly.

‘Even with a £50,000 threshold, many of the families who will be losing their child benefit are not rich and certainly not in the top 15% of the income distribution’, said Don Draper consultant to CARE and joint author of the review of family taxation published by CARE last week.

On 6th March, the Chancellor said, “I think it is fair to ask those in the top 15% of the income distribution to make a contribution to the fiscal consolidation.” (Hansard 6th March 2012 col. 708)

The following day at Prime Minister’s Questions, in reply to the Leader of the Opposition, David Cameron spoke of “not giving child benefit to the wealthiest 15% of families”. (Hansard 7th Mar 2012: col. 841)

Don Draper, independent fiscal policy consultant to CARE, said, ‘If the Chancellor wants to restrict the withdrawal of child benefit to families who are in the top 15% of the income distribution, the threshold for the withdrawal of child benefit will have to apply at an income level which is much higher than £50,000.’

The income a family would need to be in the top 15% will vary according to the number of adults in the family and the number of children. CARE understands that for a family to be in the top 15% for the income distribution it would need to earn approximately:

Single with one child

£46000

Single with two children

£59000

Single with 3 children

£70000

Couple one child

£69000

Couple two children

£84000

Couple three children

£95000

Couple two incomes (Main earner £977 pw, second earner £450 pw)

£75000

As the Chancellor’s proposals stand it appears that middle income families will lose child benefit. A one-earner family with three children and an income of £50,000 is likely to be in the 6th decile – i.e. they are less well-of than 46% of the population. No families in this situation should have any part of their child benefit withdrawn (which is what begins at £50k) when other much better-off families are keeping theirs.

Dan Boucher, Director of Parliamentary Affairs at CARE, said, ‘The child benefit proposals still are very unfair to one-earner families. The Chancellor needs to think again.’