Child Benefit Pre-Budget Briefing

Background

Ahead of the Spring Budget 2024, it has been rumoured that the Chancellor is considering extending Child Benefit to hundreds of thousands more families, by either abolishing the High Income Child Benefit Charge (HICBC) or increasing the HICBC starting salary threshold, requiring between £1bn and £4bn respectively. The HICBC claws back Child Benefit via the tax system when the recipient, and/or their partner, earns £50,000 or more a year.

Child Benefit, provided to most parents or guardians to assist with child-raising costs, amounts to £24 per week for the first child and £15.90 for additional children, typically paid to the mother or main caregiver. Initially a universal benefit, the introduction of the HICBC in 2013 impacted families earning over £50,000, with those earning above £60,000 losing the benefit entirely. This has affected around one in three families, with nearly 2.5 million households expected to be impacted soon.

In this briefing, we discuss the shortfalls of the current Child Benefit, and argue in favour of returning to a stronger universal system designed to meet the needs of parents and children alike.

Summary

The High Income Child Benefit Charge (HICBC) undermines the effectiveness of a universal child benefit.

• The HICBC claws back Child Benefit via the tax system when the recipient, and/or their partner, earns £50,000 or more a year, a funding cut to families now estimated to total around £4bn a year.
• Child Benefit should be regarded as a contribution that the community as a whole makes to all children, recognising that raising a child is a social good. Universal benefits that target all children rather than those on lower incomes are better at reducing and preventing poverty.

The thresholds for the HICBC do not reflect the economic changes introduced since 2013.

• Inflation has dragged more families into the HICBC since established in 2013, affecting thousands of children.
• Lone parent households, most of which are headed by women, are particularly disadvantaged by the HICBC, and in high-cost areas like London, an income of £50,000 for a two-child household is lower than median costs of rent, childcare and energy.

The HICBC contradicts the principle of independent taxation.

• Making one partner’s tax liability dependent on the other’s income undermines the right to independent taxation, which is an important contribution to gender equality.
  The administrative burden of claiming and repaying child benefit means many families choose not to claim it, impacting non-earning parents’ (usually women) pensions because child benefit is connected to national insurance contributions for non-earning parents.
• For women and children subjected to economic abuse, child benefit may be their only independent source of money.

Read the full briefing here