Perfect illustration of the lack of sense in the Coalition Government

[LilyBolero]

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?

And one other point - the argument they used was that 'our tax system is based on individuals, ie we are taxed individually not as a household'. But I will lose my child benefit because of dh's income, so it is not even consistent with THAT principle.

The problem is Lily that "right" and "fair" are all relative terms.

And you won't find many people who will be fussed enough to make a big deal because quite frankly HRT payers are seen by most as being loaded. "Oh you earn loads....you can afford it" will be what most think.

So whilst i personally think it's not fair, I'm sure that most of the country will not care two hoots as it doesn't affect them.

Plus it would be very hypocritical of me to say "I support the cuts....but not the ones that affect me". The only way out of this economic mess is for us all to tighten our belts. And if losing CB for my family is the price I have to pay for long term balanced budget then so be it.

Universal benefits are much much cheaper to administer than means-tested ones. It would have made far more sense to leave CB as it is and perhaps restrict it to the first 2 children in a family.

The changes won't affect us because neither of us is HR so I have no personal axe to grind but I can't see what the problem is with HR families continuing to get CB. They pay large sums of money in tax and the benefit is just a drop in the ocean in comparison.

Any savings made by taking it away from HR earners will be completely wiped out by the cost of paying people to take it away, especially since at the same time the Govt has decimated HMRC.

niceguy, it's all perception though. The proposed benefits cap of £26k + Child Benefit has been criticised by many as being 'unfair' on families, and leading to families living in poverty, and yet this is only £80 a month less than a family with 1 income of £42k. Who are described as 'loaded'.

I don't believe it will save any money at all. There will be an admin charge, there will be charges to 'check up' on people declaring it, and there will be a drop in spending by those families affected. And if Cameron does as he says and brings in his stupid married couples allowance, I think it could well be a net loser.

Also, niceguy, bear in mind that they are hoping that the size of the group affected is small enough to not make too much fuss. Bear in mind, that your family, and our's, is the group that will be hammered over and over and over again to sort out the deficit that was not created by us. The super-rich who caused the mess will not be affected. The bankers still get their massive bonuses. The rich who evade their taxes continue to do so. (estimated at £95billion - did I mention that? - that's 95x the proposed 'saving' of CB, even if they did manage to save that much).

Meanwhile, we are paying higher taxes on fuel, higher taxes generally (VAT), losing child benefit, losing CTC, our children will have to pay £9000 a year at university, if they are even allowed to go, under Clegg's ridiculous social engineering that says unis have to give preference to students from deprived households, and that children of graduates should be discriminated against. And that's just the tip of the iceberg. National Insurance rises have also hit this group, children from this group will find their schools have their funding cut, on account of the pupil premium which means some schools have funding increased, at the expense of those with better off children, because their parents are seen as being able to 'fill the gaps'.

It goes on and on. And actually EVERY cut needs to be scrutinised for fairness. If they are too lazy to actually work out a coherent policy, then they should be held to account.

Seriously, sorry to keep banging on about this, but anyone who is tempted to use the 'HRT payers are loaded' - £20 a week is the difference between someone on max benefits and a single income of £42k.

Vodafone are reportedly let off £4.5 billion in tax
This is 4 TIMES the 'so called saving' of £1billion from the CB cuts.

Philip Green reportedly earned 1.2 billion in ONE YEAR, and squirreled it away, he is estimated to have avoided £285million in tax.

While this sort of thing happens, and Cameron and Osborne do NOTHING, they are not entitled in my view to describe ANY cut affecting ordinary people as fair.

Lily - great OP, well thought out. Yes, the idea of getting the tax actually paid would be an idea and there are loads of things on t'interweb about the exact points you made. All the ideas of means tested/universal benefits would be much simpler if tax was paid to get universal benefits paid back at source; must be cheaper to administer, all info already with Inland Revenue. Then everyone in need could get the dosh, and fair tax would be paid. It's well known that means tested benefits are under-claimed. And these are the reasons the Condems won't do it.

:) thank you

Maybe they should split the CB between the pair who have children. It can then be added to the tax bill for the individual. Therefore a single parent would get double. We are only just over the threshold and it all depends on bonus, one year over, one year not. If we split it, the basic rate/non-tax-payer tax payer will get their half and it will also keep the NI conts going for a non-working parent. Unfair for me is to assume that two parents earning £26k each have more than one parent on £42k as alot of their money will go on commuting to work and childcare.

A friend was moaning because she would lose CB as her doctor-consultant husband earns too much money and is going to pretend she didn't know his earnings. That really annoys me when they have no stress, he comes home, all the work is done, kids sorted, she does not have to consider an outside job whereas those on two medium incomes will have all the pressure and where the mother is just over HRTF she will definitely lose it. However, I just remember the good things that you get from working.

It's certainly true that with a dual income there are going to be childcare costs. The unfair thing is that there is absolutely no rationale, or means-testing - under the guise of simplicity.

But in a tax system you can't just make a blanket slash, create massive unfairnesses, and then say it's in the interests of being 'simple'. You might as well take a random amount of tax, or a fixed amount, irrespective of income. The way they are doing this, they might as well say 'if you earn below 10k, you pay £0 in tax, if you earn £10k-40k you pay £3k in tax a year, if you earn over £40k you pay £15k. It's just as unfair. But hey, it's simple.

They simply have to look at this again. Making it a tax allowance over a certain threshold, and retaining it as a benefit below that would be simplest - can be done via the tax form, and for those who don't pay enough tax to cover it, they still get it as cash. Done. And if they want to save money, get it from Philip Green or Vodafone. I believe they owe a bit.

Why not scrap it altogether and just increase tax credits by the same amount, no more means testing than necessary and fairness.

But if you're going to start bringing in possibilities like, some families will have childcare costs, where does it end?

Not fucking fair.

I have always thought that there should be a tax allowance for childcare costs, when both parents are working.

house c is wrong btw- both would be on HRT.

People don't seem to have realised, but the threshold for HRT has actually been lowered to £35k!

Nerf...I agree. I'm not sure most of the people affected realise and I'm sure there will be a few shocked people next year.

Nerf, no, the threshold has been lowered, but that figure doesn't include the tax free allowance. You will start paying HRT at about 42k.

Nope- is the HMRC page that lists tax rates and allowances please go and look at the tax year 2011-12 the threshold for HRT is set at income of £35,001. The tax free allowance [sic] for this tax year is £7,475 (top of page) - which means you do not pay any tax on your first £7,474 of income. It does not mean you can earn £42,500 before paying the HRT.
For the first £7,474 you pay £0 tax
The next £27,526 you pay 20% tax i.e. £5,505 in tax
Any income over £35,001 you pay 40% tax on.
NI is in addition to this.

I agree that in principle the calculation for child benefit is bollocks and it should be done according to the household income

Blast- link to page is here

Scrap child benefit and tax people in low tax brackets a bit less. That way childless people are not being unfairly treated. If you want to have multiple kids, your choice, you pay for 'em. If you want to have kids while not working, your choice, you pay for 'em.

falcon what happens when you lose oyur well paid job that supports your family? Are you to be treated like a waster too? Child benefit is meant to ensure that children get their basic needs met...many are losing their jobs at the moment. Are you suggesting that they should suffer too, or is it a class thing?

Nerf, I'm sorry, you've misunderstood it, the 7,475k is the tax free allowance, then the 35k is on top of it. If you look at the HMRC page on tax, you'll see that £0-£35k or so is listed as being at 20% tax, but clearly you don't pay 20% tax if you only earn, for example, £3k. It is confusingly set out on their page, but the 35k refers to taxable income, so it is looked at separately from the £7,475 allowance.

BBC explanation here

Sorry, that's a bit wooly, and there's a rogue 'k' in the first sentence, gah!
If you earn £7,475 exactly, your taxable income is £0 so you pay no tax.
If you earn £8,475, your taxable income is £1000, so you pay £200.

If you earn £7,475 + £35,000 you retain your Child Benefit, because your taxable income is 35k, so you are not in the HRT bracket.

If you earn £7,475, + £35,001 (ie £42,476 in total), you lose your entire Child Benefit. So if you have 4 kids, for example like I do, that £1 gained is essentially taxed at 3000%, because you gain £1, and lose £3000.

Cliff edges in taxation are always bad. Cliff edges that also have intrinsic unfairnesses due to single/dual incomes are a disaster.