Sunday 3 October 2010

Cuts in child benefit to pay for welfare reform

The idea of a 'universal credit' to replace existing benefits is, in principle, an potentially attractive one. Yet all of the devil is in the detail,

Headlines claiming an "IDS victory" in his ferocious battle with George Osborne are at best premature for several reasons.
(i) in fact, no deal has been completed;
(ii) we don't know how the proposed reforms are to be funded, and what additional cuts; (iii) nobody can yet tell who will gain and lose from the proposed changes.

The Sunday Times front-page splash headline is Millions lose out as child benefit cut. The news report (£) reflect a 'deal' that remains work in progress. But they suggest that IDS' "victory" could be overstated, since Osborne's position was always that IDS would have to fund his reforms by making up-front savings from cutting other benefits.

The proposed child benefit cuts are central to Iain Duncan Smith’s deal with the Treasury ... The Sunday Times understands that his work programme will be subsidised by cutting the annual £11.9 billion child benefit bill.

The Treasury has yet to make a final decision, but a Whitehall source said: “We will be looking at what qualifies as a child. That means the 16 to 18-year-old bracket.”

The education maintenance allowance (EMA), a benefit for families on low incomes designed to encourage 16-year-olds to stay on at school, may also be scrapped to help pay for the scheme.

The Institute for Fiscal Studies has calculated that cutting child benefit for 16 to 18-year-olds and ending the EMA would save about £3 billion a year — exactly the sum that Duncan Smith needs for his scheme.

Duncan Smith refused to be drawn on how child benefit would be affected. However, the source suggested the government could go even further by introducing an element of means testing.

“That’s not off the table. It could be a combination of things. What we want to do is keep the support there for people who really need it, but make overall savings,” the source said.

There were very clear election promises not to means-test child benefit, so the issue raises again the dilemma of whether and how the Coalition breaks key Cameron pledges.

Moving the goalposts on qualifying ages has been mooted - for example by ConservativeHome - but David Cameron's clear promises to "keep what we inherited" on key universal benefits, particularly for pensioners, make that very difficult without breaking both the letter and spirit of his public pledges.

It would also be important to find out whether abolishing child benefit for 16-18 years olds and, particularly Educational Maintenance Allowances for those from poorer backgrounds, will have an impact on decisions to stay in formal education.


fondant said...

I left school during the 1980s, in a recession. My parents both worked, but were on low income, I had brothers and sisters living at home.

I wanted to go to FE college, but my parents couldn't afford for me to go. It was only Child Benefit and a small maintenance grant from the local authority (approx same amount as EMA), that persuaded them to let me go.

It would be appalling if the coalition does not find a way of helping working class children like me to go on to further, and higher education in future.

Robert said...

Well the cut is in!! and I suspect Ed will be saying yes yes yes we agree with this, problem for me is knowing which is new labour and which is the Tories at the moment both look and sound the same.