Monday, October 4, 2010

Don't touch my child benefit!

After hearing George Osborne's speech, announcing cuts to child benefit for higher earning families and a £500 per week ceiling on welfare payments, I went to pick up my daughter from her North London school. I estimate the majority of families whose children attend the school will be penalized by these policies: first, of course, because these are policies that almost by definition affect families rather than the childless. But second, because of the social mix of most London neighbourhoods. Parents at our school divide into two main groups: high-earning professional families in which at least one parent is a higher rate taxpayer, and low paid or non-working families who receive child tax credits and housing benefit, which in London can very easily go beyond the £500 cap. As things stand, pretty much all the parents will take a hit.

By far the most serious, of course, is the benefit cap. Let's think about this. If a family with no earnings have to rent in the private sector, than hardly any families with more than one child can stay in London. The government presumably hopes some of these people will find work (family-friendly work?). But in times of recession, who wants to employ the long-term unemployed? But this also raises the crucial question of how the cap will actually be applied: will families be forced to move, taking their children out of school and ending up in neighbourhoods or towns outside London where they have no family or friends? Or does the government hope they will just disappear? Moreover, the projected savings are only around half a billion pounds, which underlines just how little Britain actually spends on benefits: the vast majority of benefit recipients already receive a good deal less than £500 per week, which is not a lot of money to bring up a family with if you have to pay the kinds of rents typical in the South of England.

These policies have in common that children will suffer to pay down the deficit. In the case of higher rate taxpayers the suffering is relative. But even here, the better off are being discouraged from having children, which is already a hugely expensive adventure. There must be better ways of raising a couple of billion quid. A couple of pence on higher rate income tax, for instance?