UK: Child Benefit

Proposal

As part of its June 2010 Emergency Budget, the Coalition Government announced a 3-year freeze on Child Benefits. In the Comprehensive Spending Review later that year it was also announced that all households where a member earned more than £44k would cease to receive Child Benefit. Whilst the proposal would represent a significant financial saving for the government, the £44k cap was widely perceived as being focused specifically on targeting the middle-classes. The freeze on the benefit, however, would reduce the amount of support that all recipients received (albeit by a relatively small amount of money).

Severity: both the freeze and the £44k cap were relatively mild austerity proposals in that they did not represent a substantial financial reduction, and nor did they represent a reduction of a large proportion of the income of those earning over £44k

severity: mild

target: the measure was focused on both the relatively wealthy middle classes (insiders), with regard to the £44k cap; and more universally for the freeze. Overall, therefore, we consider the proposals to reform child benefit to be insider/universal in terms of their target

target: insider/universal

Refusal

Imperceptible dissent. One of the main consequences of the proposal was a significant drop in support amongst women voters – with a poll released in January 2013 (i.e. the week that the child benefit cap was introduced) showing the Tories were 16 points behind Labour among women voters. By April 2013 support amongst low-paid women especially had dropped by 12 percentage points since the election in 2010 – with measures such as the child benefit freeze (amongst a general sense of family-hostile measures by the government – something confirmed by a JRF study published in June 2014) viewed by many as one of the reasons for this unpopularity.

In addition, tens of thousands of those who would qualify for the tapered benefit either opted-out of the scheme or failed to submit their tax return on time – suggesting a considerable drop in the level of public engagement with the scheme, and prompting criticism by accountancy firm UHY Hacker Young following clumsy attempts to confirm whether payment of the ‘High Income Child Benefit Charge’ was due (which were subsequently addressed the following year by the HMRC’s decision to send out pre-filled in tax returns, although this created a new problem in that it created the possibility that tax payers would sign erroneous tax returns).

Nevertheless, these instances of imperecptible dissent were largely at the level of ideas (declining popularity) or non-claiming of benefits (which is difficult to consider a genuine form of dissent). We therefore consider there to have been limited forms of imperceptible dissent.

imperceptible dissent: limited

Public opposition. Criticism was made by a range of groups. For instance, in 2014 UNICEF criticised the Government for overseeing a rise in child poverty – with benefits policy cited as one of the reasons. Nevertheless there was little in the way of public demonstrations or protest movements mobilising to oppose the reform – and that which did occur was largely formal and institutionalised.  We therefore consider there to have been limited expressions of public opposition (non-disruptive).

Public opposition (non-disruptive): limited

Obstacles

The adoption of the child benefit reforms experienced considerable difficulty – largely due to elite-level criticism and a sense that the reforms were poorly thought-through or unworkable.

Thus, the Labour Party in opposition sought to draw attention to some of the more bizarre implications of the proposal. For instance, in March 2012, Ed Balls, the shadow chancellor, said, “David Cameron and George Osborne also need to urgently review their planned changes to child benefit which are unfair, unworkable and ill thought through. It cannot be right that a two-earner family each earning £42,000, a total of £84,000, would keep all their child benefit, but a single-earner family on £43,000 would lose it all at a stroke”.

Conservative MPs also objected to the implication that the measure created for the erosion of taxpayer confidentiality’ – representing a degree of internal divisions within the Conservative Party as an indirect result of the growing criticism that was being voiced regarding the proposal. This objection was also supported by a highly critical report by the Institute of Chartered Accountants.

Further, as the IFS pointed out, the revised policy (whereby the removal of child benefit would be tapered between those earning £50k and £60k) would create a very high marginal tax rate for those increasing earnings upwards through that range of salaries – potentially as high as around 70% marginal tax rate for those, for instance, with 4 children. This therefore created a significant potential for ‘imperceptible’ forms of resistance as middle-to-high income earners might be disincentivised to work or seek higher wages.

As noted above, the government also experienced minor governing problems as a result of the need to complete a tax return for those families earning over the £50k threshold, which gave the proposal an additional element of complexity.

A number of obstacles to further reforms of child benefit also existed. In particular, divisions within the coalition government represented an obstacle to further austerity measures – especially due to the Liberal Democrats’ fear of further alienating their core voters following the hostility they faced as a result of their support for the tuition fee hike. As Timmins shows, Ian Duncan Smith, ‘under near-constant pressure from his own party for further welfare reductions to ease the spending pain elsewhere, appeared to support ideas such as limiting child benefit to the first two children in the certain knowledge that Clegg would veto them – as he did’ (Timmins: 335, emphasis added; see also D’Ancona: 334). This inability to introduce further reforms therefore represented additional governing problems (again, though, these were relatively minor).

Obstacles: as noted, we see two types of obstacles experienced by the government as a result of the refusal that met its child benefit policies. First, we see indirect obstacles arising from internal divisions within the coalition and the Conservative Party, with this growing internal dissent eventually putting considerable pressure on the government (indirect, moderate). Second, we see mild governing problems arising from: (i) the complexity of the system and especially the need to figure out how to incorporate a middle class that was disinclined to fill in a tax return in order for them to be eligible to receive a relatively very small amount of additional benefits; and (ii) the inability of the government to adopt more punitive measures as a result of the fear of further public criticism on the part of the coalition partner, Lib Dem Party.

obstacles:
indirect obstacles (moderate); governing problems (mild)

Responses

concessions – As a result of the opposition and obstacles discussed above, the Government announced in March 2012 that it would moderate its proposals, offering a concession to those who had opposed the move. As a result, Osborne ‘bowed to pressure‘ and both increased the threshold at which families began to lose child benefit (to £50k) and created a staggering in the impact of the cap (with the full cap only taking effect once one of the earners reached £60k). This represented a considerable change to the initial proposal and we therefore consider it to be a substantial concession.

In addition, in January 2013 (i.e. shortly after the implementation of the child benefit cap) the Government announced that it was considering a £1.5bn child care voucher scheme – in part, it was felt, in an attempt to soften the impact of the cap (indeed, insiders confirmed this). Similarly, in September 2013 the Government announced plans for free school meals for all infants, in another move that was interpreted as both partly returning lost resources to those who had lost out as a result of the child benefit cap and a result of the political capital that the Labour opposition had made out of this (especially on so-called “cost of living” issues).

concessions: substantial

Outcome

Went ahead?

Yes, albeit with substantial concessions – the child benefit cap began in January 2013; the child benefit freeze that was put in place in 2011 was continued in 2015, so that by 2016 there will have been no rise in child benefit since 2010.

Consequences?

 The introduction of the scheme required the adoption of significant concessions/amendments to the originally proposed version. However, following its adoption no clear consequences were discernible.

sum: obstacles (mild/moderate) (0.75), no consequences, substantial concessions (4) (total: 4.75) 

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