Freezing Child Benefit: purely ideological and certainly not fair

By Sebastian Michnowicz

With the Telegraph dubbing him ‘the enforcer’ it seems George Osborne is to budgets what Dirty Harry is to crime: relentlessly tough. But while we may not mind Clint Eastwood’s character handing out a bit of rough justice to deserving criminals, Osborne’s brand of rough justice is not as fair as he keeps telling us – big business is feeling lucky as corporation tax is set to drop 1% every year for the next four years and the poorest, who are the least to blame for the recession and deficit, are the ‘punks’ looking down the wrong end of a Magnum .44 budget. I promise I’ll stop now.

Despite ‘softeners’ such as raising the income tax threshold by £1,000, it is well known that VAT increases affect the poor the most as it makes up the greatest percentage proportion of their tax expenditure. Of course, it’s easy to shout opposition to every single wave of cuts or tax rise we perceive to be unfair, particularly as Labour would have to have made cuts of its own, but Osborne’s decision to freeze child benefit for three years is purely ideologically motivated. It would have been much fairer, and I suspect would have made greater savings over the course of the Parliament, to make child benefits means-tested. This conviction was instilled in me by the most unlikely person. I’m almost ashamed to say, it was the member for Runnymede and Weybridge… my Tory MP.

As far as being a Party activist goes, I’m unfortunate enough to be located in that impregnably safe Labour area called Surrey (even witless sarcasm helps) and a few weeks before the general election I received an email from a supporter (they do exist in these parts, though truly loyal specimens are rare) informing me that the local Conservative Association was holding a public meeting including a Q&A session with Philip Hammond, then the Shadow Chief Secretary to the Treasury, now the Transport Minister.

Driven partly by the belief that I should make an effort to find out what my representative in Parliament stands for, even if I’m politically opposed to him, and partly by the fact I had nothing better to do on that particular evening, I went along. Philip talked for about ten minutes about his work and outlined Conservative proposals (mostly the marriage tax breaks) before the floor was allowed to put questions to him. It wasn’t long before the issue of cuts came up and the first thing Philip mentioned was the Labour generated ‘benefits culture’. He went onto say that it was ridiculous that the child benefit system was universal.

I was aghast at this response. As a party, we’re rightly proud of the universal, free-at-the-point-of-use NHS that provides healthcare to all, without discriminating against a person’s background or income. In a similar vein, universal child benefits signal that the Government equally supports all parents’ efforts to create the citizens of the future.

But then Philip gave an example of why he thought what he did. Comfortable in the fact that the audience was pretty Tory-friendly and he was having quite an easy time of it – his oratory is very polished – he talked of a colleague that was earning £83,000 and was receiving child benefits for his two children. In fact, his colleague was already so wealthy that it was laughable he was even receiving the benefit. He was talking about George Osborne. Suddenly, I became uncomfortable at how easily a senior Conservative MP had brought me around to his way of thinking. The more I thought about it, the more it made sense – when we are in a situation where deep cuts are necessary, is it fair that people on low and middle incomes pay taxes into a system that gives child benefits to millionaire bankers who put us in the state that necessitated this sort of budget?

In his budget speech, Osborne justified the freeze by saying that means-tested child benefits would ‘create a massively complex new system to assess household incomes’. This is an excuse as patronising to those who really rely on the benefit, as it is untrue. Working Tax Credits are means-tested and the amount of tax credit received directly depends on the recipient’s income from their employment. Child benefits could be paid exactly as they are now but only to parents whose entire annual income does not exceed, say for the sake of argument, £30,000. To make this kind of assessment would involve a lot less work than that involved in assessing how much somebody is entitled to in Working Tax Credits.

The reality is, however, that creating a new system to means-test child benefit is deemed by the likes of Osborne as more ‘bureaucracy’ or ‘state interference’ that can be avoided if a simple three-year freeze is imposed. The decision, therefore, is one made on ideological grounds and not on concerns of fairness. While the child benefit may be mere chicken-feed to him, let’s hope for the sake of those who really need it that inflation stays low, and the freeze doesn’t bite too hard.