Budget 2012: Child benefit lost for families earning more than £60,000

In his budget speech today, Mr Osborne announced plans which will bring in means-testing for child benefit for all families.

Families will begin to have their child benefit reduced when one parent starts to earn more than £50,000.

Child benefit will fall by 1 per cent for every £100 earned over £50,000 and those households where someone is earning more than £60,000 will lose all of the benefit.

The Chancellor had been under pressure to re-think controversial plans which were due to be introduced next January, which had been roundly criticised for being unfair because families with both parents earning just under the higher-rate tax threshold, with a household income of more than £80,000 a year would keep the benefit, but a family with one parent earning just over the threshold would lose it.

Mr Osborne said that the change to child benefit would avoid the ‘cliff edge’, which would have meant that families would have had their child benefit completely withdrawn all at once.

‘An extra 750,000 families will keep some or all of their child benefit and 90 per cent of families will remain eligible,’ Mr Osborne said.

However, the plans announced in today’s budget still mean that access to child benefit will still be based on individual parental income, rather than household income, a move which has also been criticised.

Anna Bird, deputy chief executive of the Fawcett Society said she was disappointed that the Government had decided to end child benefit for all families.

 ‘The decision to means test child benefit marks a historic break with the previous consensus that such a benefit, typically spent directly on meeting the needs of children, should be universal,’ she said.

‘Regardless of where you draw the line, restricting who gets child benefit ushers in a new era in our understanding of the role of the state in supporting children and those who care for them.' 

She also said that it was unfair that only higher earners with children should have their incomes affected.

‘While the Chancellor is right to claim that higher rate taxpayers must do their bit for deficit reduction, it is unfair that only those higher earners with children should see their incomes affected.

‘Given that the Government has chosen to proceed with this policy, we welcome the tapering measures introduced by the Chancellor to smooth the cliff edge effect for higher earners in the withdrawal of child benefit. However, the measures announced today will do nothing to challenge the unfairness that means a couple whose combined income is below £100k will lose less than a family where only one parent works earning just over £50k.’

'Spiralling cost of childcare'

Anne Longfield, chief executive of 4Children, said, ‘One speech has wiped away a principle held for over 35 years – and before that in other forms - of valuing and recognising the importance of children in every British family.  

‘Child benefit has been at the heart of a choice we all make over how we value the bringing up of all children in this country. My fear is that society may become less cohesive as a result of George Osborne’s budget today.

‘This isn’t simply a case of low-income families paying into a benefit received by others on higher incomes, but of a budget that has failed to deliver the relief that hard-pressed families need. Changes to child benefit really need to be deferred until 2015. Such uncertainty in this financial climate is not fair on parents struggling to make ends meet. 

‘It was also hugely disappointing that this budget has done nothing to help parents with the spiralling cost of childcare. George Osborne missed an opportunity to return the childcare element and help parents remain in sustainable employment. As any working parent knows, affordable childcare is difficult to find and the Government needs to be doing much more to support them.’

Teachers’ union the Association of Teachers and Lecturers said there was a lack of child and education-friendly measures in the budget.

Dr Mary Bousted, general secretary of the ATL said, ‘While the lowest paid will benefit from reductions in income tax next year, the Chancellor did not give us a Budget for children or education. 

‘The Budget will do nothing to reduce the growing inequality in income which is a significant factor behind the inequality in educational achievement. Nor does it provide resources for extra help for children who struggle at school, or give hope to most unemployed youngsters.’ 

Dave Prentis, general secretary of public sector union Unison said the budget had done nothing to help public sector workers and the unemployed.

‘The chancellor’s budget has given a helping hand-out to his rich friends in the city and delivered a slap in the face to the unemployed and low paid families.’

He added, ‘The Chancellor’s budget gives with one hand and takes with the other. The increase in the personal allowance will help those who are working – but offers no relief for the unemployed.  And we know that the Government has already announced cuts to tax credits which hits hundreds of thousands of working families with children.’

Unite General Secretary, Len McCluskey said, ‘Raising the personal allowances will be some small relief for millions hard-pressed families – but will only amount to a meagre £4.20p-a-week, when household bills are soaring and VAT remains at 20 per cent because of this government. Contrast that with the loving care Osborne lavishes on the wealthy and it is clear where this government's priorities lie.’

Mr Osborne came under fire for cutting the 50p tax rate to 45p from April 2013.

Labour leader Ed Miliband said that by reducing the top rate of tax, the budget was ‘a millionaires’ budget that squeezes the middle.’

‘After today’s budget, millions will be paying more, while millionaires pay less,’ he said.

He said the Chancellor had failed the fairness test for middle-income families through cuts to tax credits and child benefit, and referencing the Government’s slogan, said it marked the end of ‘We’re all in it together’