David Cameron yesterday sought to allay fears about the impact of removing child benefit for people in the upper income tax bracket – suggesting that a transferable tax allowance could ease the pain.
He told the BBC: “Obviously, it’s coming in 2013 and we have also got to look at other things we have promised to do. If you look, for instance, at the issue of the stay-at-home mother, we do talk in the coalition government about having some sort of transferable tax allowance to help couples in that way.”
The only catch is that the allowance – at least in the form it was announced pre-election – would not really make much difference to those affected. That is because a] it was planned for those on low incomes and b] it amounted to only £150 a year*. So it is a case of apples and pears. Plus c] the Lib Dems have reserved the right to vote against the idea.
The government are struggling to explain the issue of how a single-earner family will lose the benefit as the £44,000 income threshold is crossed, while two earners with a much higher joint income will not if neither pays higher-rate tax. It’s not clear that a new transferable allowance – even if is substantially tweaked – will do the trick.
* High earners will from 2013 lose about £1,000 a year for their first child and an additional £700 for subsequent children under the plan to cut back child benefit.
Jim Pickard
Kiran Stacey