- Labour scraps plans to assess child benefit at a household level
- Move estimated to cost £1.4 billion by 2029/30
- Decision leaves single earner families at cliff edge of benefit
- Child benefit claimants at their lowest level since records began, according to the latest figures
Laura Suter, director of personal finance at AJ Bell, comments:
“Labour has scrapped plans to assess child benefit on household income, undoing the Conservatives’ reforms to simplify the system and stop cliff edge cut offs penalising single-earner families.
“In his last Budget in March this year, former chancellor Jeremy Hunt announced plans to base eligibility for child benefit on a couple’s income. However, it kicked the can down the road on sorting out how exactly it would implement it – saying it will consult and then implement in two years’ time. This left the door open for Labour to drop the plans, and it has done just that. There’s no doubt that it would have been a huge administration task for HMRC to assess couples on their household income rather than sole income, meaning there is no easy fix.
“Put simply, Labour say the move would be too costly. Currently you’re eligible for full child benefit if you earn up to £60,000, but Labour claim changing the system to base child benefit on a household income of £120,000 would cost £1.4 billion by 2029/30. It means the system that punishes single earners will remain. Currently, a sole earner on £80,000 gets no child benefit while two workers each on £59,000 get the full benefit.
“One change that Labour says will make it easier for families is that child benefit overpayments can be repaid through someone’s tax code from next April – improving the admin side of child benefit. However, that’s merely fixing one problem with the system when in reality it needed larger scale reform. The complications in the system mean it is underclaimed and not well understood.
“According to the latest figures, a total of 741,000 families opted out of getting the payments, accounting for 1.12 million children. The figures show that the number of families getting child benefit is at its lowest level since records began in 2003.”
