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Original poster

Perfect illustration of the lack of sense in the Coalition Government

55 replies

LilyBolero · 01/07/2011 16:09

This Government seems to have no sense. No brains. And have a serious case of 'speak, decide, announce' before every the brain is got out of the jar on the shelf.

On another thread it got round to Child benefit. And this illustration occurred to me. A perfect example of 'joined up thinking'.

Imagine a street, lined with houses. In the first house, House A lives a couple. They have four children. One of the parents goes out to work, and earns a salary of about £42.5k. After tax, this amounts to about £30k. Under the budget cuts they lose child benefit of £3k per year. So they have about £30k to spend per year, because they are deemed 'too wealthy' to receive child benefit.

The next house, House B houses another couple. Neither parent works, and they instead rely on benefits. They qualify for the maximum benefit payout and receive £26k. Under IDS' new proposal today, child benefit is paid on top. As they have 4 children, this gives them a further £3k, giving them a total disposable income of £29k, only £1k less than House A, which is deemed 'too wealthy' to keep their child benefit.

In the next house, House C lives another couple. They both work full time, and both have a salary of about £41k, giving a gross income of £82k. After tax this is a household disposable income of £60.4k. They also have four children, and because neither parent is a HRT payer, they also get £3k in child benefit, so their disposable income is £63.4k, over double the house that lost their child benefit for being 'too wealthy', and yet they retain it. This helps them cover childcare fees.

In the final house, House D, a single mother lives with her 4 children. She works full time, and has no income from the children's father. 2 of the children are in school, and go to after school club, 2 of the children are in full time nursery, incurring huge fees. She earns about £42k, giving a net household income of about £30k, the same as House A, and very similar to house B. However she loses her Child Benefit, because she is 'too wealthy'.

4 houses, 4 situations, is the child benefit paid to cover need, or is it just an arbitrary hand out given to some and not to others? Round the corner lives a family with a disabled child. The mum did have a career, but now stays at home as a carer. Her husband has a salary that just tips them into the HRT, so they lose their CB.

Where is the joined up thinking?

OP posts:
meditrina · 01/07/2011 17:46

I agree with you completely.

Although I can sympathise with the need to reduce the bill, the method of implementation is a total FAIL on fairness.

And they've still not said what the plan is for non-working partners of HRT payers who get their NI credit from the CB. Or are they meant to forego part of their State pension because of gaps in their contributions record? House A loses out again.

Original poster
LilyBolero · 01/07/2011 17:40

Well, there is one very easy way of doing it.

For low income families (say, those on under 15k, or perhaps those on FSM, just making sure no-one slips through the net), pay CB, either as at present, or perhaps in terms of vouchers etc (to avoid that minority of families that use children as a cash cow - and I know some - because having more money in the form of food and clothes vouchers is not as appealing as more £££ in the account, and would make sure that the money got to the children - someone who uses the CB correctly wouldn't be affected in that way).

For those who pay enough income tax, make CB into a taxable allowance - possibly at a smaller amount than is received in benefit - I would keep it the same for the 1st two children, and then reduce for each further child. This acknowledges the added drain a child puts on a salary, and recognises that actually, if you are a couple with no children, on the same salary as a couple with children, you have many fewer calls on your income. And if a few higher earners get it as a tax break, so be it.

It's a cop out to say 'to make it simple we're going to totally screw a few families'. They also haven't made it clear whether the anomaly is the single income 42k family or the dual income 80k family - ie whether they intend that you shouldn't receive CB on a household income more than 42k, or whether they intend that you SHOULD receive it up to about 80k. Because if it's the former, that is to say that a person on full benefits (house B in my example) can receive 26k, and still qualify for full child benefit (and remember they may not stop at 4, they could have any number they like, assuming IDS' proposal that CB be on top of the cap), when a family that takes home 30k is 'too rich' to get it. So House B can very easily be wealthier than House A. House C is also wealthier. And it is House B that suffers and has to subsidise the rest.

Call me Dave and Gideon continually said 'it's Tough but Fair'. Tough yes, Fair, patently not.

OP posts:
Peachy · 01/07/2011 17:37

They're not ironsing out wrinnkles, I ahve a letter from the Disability Minister saying basically at least people have time to get used to it.

CogitoErgoSometimes · 01/07/2011 17:17

In any tax/benefit system which is designed around keeping things simple, there are going to be anomalies. If the system is redesigned to eliminate those anomalies, it will a) become more complex and b) throw up more anomalies. The most simplistic solution was to maintain the universal benefit but then you had people in 'House E' with 4 kids earning £250,000/year and pulling down £3k in child benefit at the same time. Few thought that was fair. In practice, in a population where the average household income is circa £25k, very few people meet the criteria for your 'House C' example. However, we have until April 2013 before the changes come in. Plenty of time to iron out wrinkles.

Peachy · 01/07/2011 16:13

Tell me about it.

We're a different house: couple of disabled kids, DH earning a low income salary and me caring- I;d love to work, hope to manage part time but lady at council yesterday said that in her experience all carers are the same and they all never manage it (depressing!).

Anyway our income wont; see a drop in CB but the changes to WTC means our family income will drop by £200 PCM due to the cut in disability tax credit.

DH graduates next eyar and if the business doesn't grow a lot in the next eyar, scary given the economic environment, we lose everything. And as the boys would ahve to go to foster care as they can;t go to homeless accom due to SN, I do mean everything. I ahte hate hate this Government, and myself for having been an LD voter in the past.