Child benefit changes - what do you think?

[KateMumsnet]

Next week, the Inland Revenue will write to 1.2m families about upcoming changes to child benefit eligibility. The changes mean that from next January, single-income families earning more than £50,000 per year will no longer be eligible for the full amount (currently worth £1,055 for the first child) - and those earning over £60K will no longer receive it at all.

The changes are controversial. Dual-income families who both earn just below the 50K cut-off - who have, in other words, a family-income of just under £100K per year - will continue to receive the full amount, leading to criticism that the changes penalise both stay-at-home mothers and single parents. Accountants are warning that new partners of divorced parents could also lose out. And the entire process is so complicated - with families forced to fill out complex self-assessment forms for the first time - that the Inland Revenue has reportedly postponed sending out the letters because they can't find a form of words that families will be able to understand.

What do you think? Will you be affected by the changes, and what will it mean for your family? Are stay-at-home mothers being unfairly targeted - or is staying at home a luxury which shouldn't be subsidised by the taxpayer? Should child benefit be universal - or should it be available only to families who are really struggling? Let us know what you think here on the thread, and don't forget to post your URLs if you blog on this subject - we'll be tweeting them over the next few days.

Also you need to consider competitiveness in the world market. Strong unions kept earnings high in some industries such as the car industry but that made them uneconomical in the world market and led to redundancies. We are left with call centre staff with no union rep who get the raw deals now. It is difficult but it would be better for me not to try and keep salaries high but to reduce benefits but to bring the tax and in threshold up to about 20k which will cut the burden on employers and allow them to maintain competitiveness in the market. Tax after 20k should be higher than 20 per cent. Imagine everyone earning a reasonable income and employers being able to take on more without NI consequences. A flat rate pension for all.

In your example the person would still be better off by 144 per month and therefore benefits could still be reduced and their employers NI burden would also be reduced. How many more companies would then invest in the uk?

Sorry 104 per month typo but far better to have more money you have earned in your pocket than claimed. If those people have partners earning about 20k their combined extra income would be 421.66 per month enough to cover bills.

Also cleaners still have an impact on global competitiveness even though they are probably employed by a separate company. Their employment costs would still be passed on to the company requiring their services and therefore their bottom line.

I would increase the tax rate for those earning above 20k. Many would still be better off and there would be a reduction in benefit costs and more investment in the uk.

Even if you brought the higher rate tax threshold in at 20k somebody earning 40k would be slightly better off and this would be a way of redistributing wealth but making work pay and do companies a favor. I sound like a lib dem!

Yes visualarts but we already have an issue in many companies [typically manufacturing not finance] where the execs do not have a big distribution. I work in hr of such a firm and less people want promotion because of increased responsibility and not much more pay. Our average salary about 24k so not huge by increasing the bott tier there is a ripple effect and the foreign owners will ask for Jon cuts leading to even more stress for those left and even less chance of those wanting promotion so we have to reward those prepared to take it on as we need leaders.

If we offered at £20k personal allowance I thkn what might happens is that instead as now where we give quite a big subsidy for those with children through tax credits and housing benefit where the parent does not earn much but nothing like as much to a person without children instead there would be less subsidy for families on low pay./ That switch woudl be fine in my book as people would decide to have children based on whether they could afford them rather than knowing that the state would provide.

Xenia's figures are pretty sound, which is why it's pointless to argue that a £50k salary in the SE represents a proper family wage if you pay childcare costs.

One way around this is to restrict CB to pre-school children ....

What about holiday and after school clubs? They only really stop when child old enough to get themselves out of bed, off to school and back again and to stay alone during the holidays. Although per school may cost more.

I have certainly found it very helpful when my older student children were /are around as with the younger children though they do not need someone to get them up they need someone around more generally and to drive them which is why if you have a large tended family things can work. Across the road their
friend's grandparents live with the family etc etc.

Mind you not that many young wives want to live with their husband's parents and support them into old age.

On my figures on another thread I did more yesterday of the person on £50k single parent as I am without support from another partner or chidlren's father (althoguh I do earn more than £50k) who is paying for one full time nursery place and a mortgage on a flat worth £150k in say Watford or Luton. If we move her to the street my mother moved t in 1939 the houses there cost £50k but that is unusual. I think £150k is not that expensive for our mythical £50k er who works full time and needs full time child care.

The advantage fo this person is that childcare does stop and then she will be much better off than the benefits claimant who has never worked. Also the £50k er may well get promotion at work and earn quite a bit more whereas the claimant may well be a claimant until she moves to her pension at 67 or 70 or whatever age the state pension will kick in by that time.

I don't think either my parents or DH's would want to live with us in exchange for childcare either!

I accept that 50K doesn't necessarily go all that far (though it sounds a lot to me, as it's twice the largest salary I've ever had), but this discussion is starting to sound as if 50K+ earner and benefits claimant are the only options for women ...

What about allowing working parents to use their children's tax allowances as well as their own? Do we like that idea?

Using the child's tax allowance would be useful and would encourage parents to work. With two children that could make about £432 difference for basic rate tax payers per month and £562 for higher rate tax payers - would cover potentially bulk of childcare costs with childcare vouchers on top if employed.

alim, but bear in mind loads of that salary goes in tax and childcare for one nursery place full time comes off it.

yes allowing parents to use the child's tax allowance could be possible. I would favour few tax breaks and lower tax rates instead but as that is not likely then this is a good idea particularly for those of us with 5 chilren. I work for myself. I am a pure full tax payer supporting many benefits claimants but if I wanted to I could easily given the advanced ages of the children bring them into the business and we could use 6 of us = 5 children and me dividing up the money (or shares if it were a company) rather than all comes to me taxed at God knows what upper rate as now. instead I choose to spread my largesse to the poor and they kiss my feet in adoration.

We did the calculations when dh was made redundant, and found that if we chose to go down the benefits route, we would be no worse off than when he was earning 50k.

However, he was fortunate to find another job, which is obviously ideal.

The 'single income versus dual income' anomaly is so well documented, there is no need to re-hash it. It's clearly an unfair policy, appallingly badly conceived and with an even worse implementation plan.

Those people saying "People on 50k don't NEED Child Benefit - it's just a missed ballet lesson to them" need to be very careful. Because unless you are prepared to account to the Government for every penny YOU spend, and have them 'decide' whether or not you 'need' a particular benefit (Christmas presents for children - THEY ARE NOT NECESSARY, school trip - NOT NECESSARY), then it is a dangerous path to go down, deciding whether others 'need' a benefit or not.

Imo it should be redesigned as a tax allowance for HRT payers, and a benefit to non-HRT payers. Thus keeping the universality, but removing this idea that it is a 'handout' when it is in fact a recognition of the higher costs raising children entails.

Also, just to add, it's not just London which is hellishly expensive - there are other parts of the country where the house prices/transport prices are almost at London levels, but the salaries don't match. Look at the ratio of house price to salary in the SW - it is appallingly expensive to live there, you could commute into London, which is why it is expensive I think, but then of course you pay massive transport fees.

Fwiw, where I live, not in London, we have to pay for bus passes for the children to go to school - £50 a month PER CHILD. If we weren't earning, they would be paid for, along with the school dinners. I have four children - that is a LOT of money a month to pay for their education! (not all are on the bus pass yet, but even with, say, 3 of them, as it will be, that's a lot of extra to find!)

LilyB, yes that was what it was in the 1950s and 1960s - a recognition that no matter how rich you are children are expensive and do the next generation good so you got a tax allowance. I think back in about 1960 even before my time you could even covenant money to your own child (later changed to grandparents) so avoid tax lawfully.

Agree on transport costs too and no free prescriptions. My 3 student children found prescriptions charges very high (and they had savings lucky them so couldn't get out of paying them) and still find them expensive in their first jobs.

Obnviously with chidlren that age I see them and their friends on a daily basis and their finances. It is very expensive to make that decision to take a working life not a life on benefits. One was looking at a flat to buy - lucky her - and the flat below was family - council had let for them an enormous gorgeous lovely flat and there was she working many many hours a day not just 9 - 5 nad only able to afford some tiny grotty thing above and may be not even that because she took the path of not having chidlren until can afford them and not expecting the state to provide. obviously one then says well over time it will pay off that you work (as I am sure that it will) but it can look unfair,.

On another thread I just posted some sums again £50k, £13k nursery full time, £13k repayment mortgage on £150k flat, £2k commuting costs, £13k tax or something like that left the single mother who works on £50k with £7k and less in hand than the benefits claimant singl mother who doesn't work at all. you can see why Ian Ducan Smith has hiw work cut out on making work pay because unless as a society we decide well those single mothers can be housed 20 to a dormitory with food provided and compulsory work fare (which I assume most people dont' want) we have to house them and keep them to a standard which can take £50k in gross earnings to cover.

Xenia, you have been doing great work on this thread. There is a much easier way to make the comparison though. Take the 'benefits cap' which is 26k. This is essentially AFTER tax, because there is £0 tax to pay, so is £26k. Then do a search on here for all the threads complaining that £26k is totally unreasonable.

But £50k gross is about £35k net, and then once you add in free school meals, free prescriptions, travel costs, childcare etc etc, it's not rocket science to see that it's not the comparison of 'poverty versus wealth' that many believe it to be.

I think people often just forget about tax, and £26k does seem a lot less than £50k. It is rather closer to £35k.

(should clarify, the threads saying that £26k is too LOW a cap)

Good point. From April l 2013 there is a housing benefits/IS/JSA etc cap is £500 couples and loan parents £350 a week single people
www.dwp.gov.uk/docs/hb-benefit-cap-draft-regs-2012-memorandum.pdf

So when in force and there will be I bet some discretion and loads of not quite following the rules rather than loads of people immediately thrown out of their rented housing.. but I'll wait to see if they follow through.... our single mother who doesn't work with one child maximum will be £26,000. I think she wills till get her council tax benefit and free presciptions and in due course school meals on top. So the £26k includes housing.

Our mother with mortgage of £150k repayment mortgage pays about £13k a year on that and she has about £14k full time nursery costs. She has about £7k after paying her mortgaeg taravel costs tax. NI and nursery costs.

The single non working mother has may be up to £26,000 including her housing although she may not live in an area where rents are near the cap.

If I look at the tax my poor daughters in their mid 20s pay it's ridiculously high. Income tax was brought in about 200 years ago as a temporary measure to fund the Napoleonic wars. Instead all Governments have continuously increased the state and their power so that more and more people in effect work for the state like in a communist country so that you work for the poor and others and are allowed to keep in many of our cases now less than half what we earn as some kind of remaindered hand out with all the rest taken away from us and spent as the state sees fit. I spoke to someone who said a bit of Government was paying £13000 for a construction job he would normally charge £800 for. So very much waste.