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Child Benefit

Volume 451: debated on Wednesday 8 November 2006

To ask the Chancellor of the Exchequer what estimate he has made of the cost of uprating child benefit in line with average earnings in each year from 2007-08 to 2012-13; what assessment he has made of the effect that uprating would have on child poverty; and if he will make a statement. (100059)

The cost of uprating child benefit in line with average earnings for each year from 2007-08 to 2012-13 is shown in the table.

Cost of uprating child benefit in line with average earnings: 2007-08 to 2012-13

Cost (£ million)

2007-08

200

2008-09

400

2009-10

600

2010-11

900

2011-12

1,100

2012-13

1,400

The Government do not produce a forecast for average earnings growth to 2012-13, so for this analysis we have assumed earnings growth in line with the estimated trend growth in labour productivity. See “Budget 2006”, Table B2. We have further assumed growth of retail prices in line with the projections published in “Budget 2006”, Table C3.

Uprating child benefit by earnings for a period of six years would amount to a cumulative increase of around 12 per cent. compared with uprating by prices. Based on a 60 per cent. contemporary median income threshold, it is estimated that a similar real terms increase implemented today could lower child poverty by between 130,000 and 160,000, depending on the choice of equivalisation scale for household incomes.