Social Security (Contributions) (Rates, Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2020 — House of Lords, 2020-03-03
Topic: Social Welfare
Margot Aline (Labour, Centre-left): My Lords, I wish to say a few words about child benefit. I will not repeat the general arguments about the four-year benefit freeze that I made in Grand Committee but simply want to underline the implications of that freeze for child benefit, particularly because the freeze about to end must be seen in the context of the treatment of child benefit since 2010 Child benefit had already been frozen between 2010-11 and 2013-14 and was then increased by only 1% for two years before being subjected to the freeze in working-age benefits. This means that, with the exception of two years when inflation was really low, its value has been reduced every year since 2010. The result is that not only has its real value been reduced by around 6% because of the four-year freeze but, according to the House of Commons Library briefing, it is now worth 17% less for the first child and 16.5% less for subsequent children than it would have been had it been uprated in line with the CPI since 2010. That means a loss of nearly £370 this year for a two-child family. The Resolution Foundation calculates that for second and subsequent children the benefit is now worth less than when it was fully introduced in 1979, is less than half as generous as it used to be compared to average earnings and, shockingly, is less generous than the post-war family allowance. For first children, it is close to an historic low. The Resolution Foundation concludes that "it is fair to say that child benefit is at its stingiest in forty years." Thus, while we are of course all pleased that the freeze has come to an end, as required by law, simply uprating benefits in line with inflation is not good enough. The Minister said that an extra £800 million was going to be spent on this and tax credits. Is that £800 million simply due to inflation-proofing? If so, it is not extra at all but simply keeping things as they are. If austerity is genuinely coming to an end, the Government should make good at least some of the loss that child benefit has suffered during the past decade, as it is unfair that families with children should bear the brunt of austerity. Raising child benefit by more than inflation would be much more effective in helping low-income working families than a further rise in personal tax allowances It is not just the benefit that has been frozen but the thresholds for the high-income charge introduced in 2013, which are still frozen. I will spare noble Lords the principled and practical arguments against the introduction of the charge, but, having introduced it, is there not a responsibility on the Government to ensure that the thresholds keep pace with median earnings? Both the Resolution Foundation and the IFS have analysed the effects. According to the IFS, in the last financial year around 270,000 more families lost some or all of their child benefit than would have been the case had the threshold been price-indexed. The difference would be bigger still had it been earnings-indexed, which is arguably what it should be unless the Government want to hit families lower down the income distribution than originally intended Unless there is a change of policy, the IFS warns that by 2022 as many as a fifth of families will be affected. Moreover, if the higher-rate tax threshold continues to be indexed in line with inflation while the child benefit threshold remains frozen, it points out that "for the first time significant numbers of families without a higher-rate taxpayer will lose some Child Benefit", possibly as many as 120,000 by 2022-23. Is this really what the Government want? Extrapolating further into the future, the Resolution Foundation points out that, because the income charge is applied to an individual’s income and universal credit is based on family income, there could come a point when some people are simultaneously receiving universal credit and being subjected to the high-income child benefit charge. As it observes: "This would be somewhat absurd, as well as creating marginal tax rates of near 100 per cent." As the IFS points out, cutting benefits "by stealth" in this way "can do nothing for trust in government." Can the Minister explain the justification for freezing the thresholds? As a matter of urgency, could he take a message back to the Treasury asking the Chancellor to stop the rot in the next Budget and increase the thresholds, preferably in line with earnings but at the very least in line with prices, and restore them to their position when introduced There was a time when the Conservative Party strongly supported child benefit, which of course replaced child tax allowances as well as family allowances. It acknowledged the important role it plays in recognising that children reduce taxable capacity at every income level, in strengthening work incentives, in providing families, particularly mothers, with a degree of financial security and in supporting the next generation regardless of the family they are born into. It hailed it as "simple and well understood", although it is rather less simple now because of the high-income charge Some 75 years ago, during the final stage of the then Family Allowances Bill, Eleanor Rathbone told MPs: "In early days I used to describe meetings of employers and employed, landowners and rentiers sitting round a table competing for their share in the national income with a woman coming from behind and holding out her hand, saying, ‘I am the mother, the future citizens and workers depend on me; where is my share?’ This Bill gives the mother through her children her share, although it is only a very little share so far."—[Official Report, Commons, 11/6/1945; cols. 1419-20.] Can the Minister assure us that the Government are committed to ensuring that children now receive their fair share through the child benefit scheme that replaced family allowances, or are we witnessing the gradual destruction of Eleanor Rathbone’s dream?