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Child Benefit

Volume 591: debated on Thursday 2 July 1998

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3.6 p.m.

Whether they will take steps to discourage couples in receipt of a joint income of over £200,000 per annum from claiming child benefit.

My Lords, Her Majesty's Government are committed to retaining universal child benefit where it is universal now because it is the fairest and most efficient way of recognising the extra costs and responsibilities borne by all parents.

My Lords, is the Minister aware that neither the Answer he has just given nor the one given in the debate on Monday give any comfort at all to those who feel that scarce social security money should go to those really in need and not those who are quite rich enough to manage without it? Can he not see that it is quite wrong if a woman is earning a top barrister's salary and her husband is perhaps a Cabinet Minister—or the other way round—that they should draw child benefit? Ought that not to be stopped?

My Lords, the noble Baroness is thinking along the same lines as my right honourable friend the Chancellor of the Exchequer. In another place he said,

"It must be right in principle that if Child Benefit is raised in future then there is a case for higher rate taxpayers paying tax on it".
There are clearly arguments for and against, but it is a matter for my right honourable friend the Chancellor.

My Lords, will the Minister confirm that the Government are committed to maintain the principle of separate taxation of married women's incomes? Will he confirm that if that is the case the sums to be raised from taxing child benefit are nugatory? Will he further confirm that the costs of any other form of discouragement, as recommended in this Question, might be so great as to make the measure short of cost-effective?

My Lords, I can confirm that the Government are committed to maintaining separate taxation for married couples. Under no circumstances will a woman's income be added to her husband's, unless they wish it. As regards the value of taxing child benefit, that depends on the tax position of the people concerned. If we assume that people are paying the standard rate of tax, and if child benefit is taxed at the present rate, it could raise something in the region of £700 million.

My Lords, will my noble friend confirm that child benefit replaced child tax allowances? Will he confirm that if child benefit were withdrawn it would be only equitable that child tax relief should be restored to those from whom it was withdrawn?

My Lords, does the noble Lord agree that no one could reasonably disagree with his suggestion that there are two views: first, that it is absurd to provide people on very high incomes with state benefits, and, secondly, the opposite view? Which side do the Government come down on?

My Lords, the Government's policy is to direct the benefit towards the child rather than to the family set-up. Child benefit is one of the most efficient ways of targeting children because over 98 per cent. of child benefit is taken up.

My Lords, does my noble friend agree that it is of course right of the Chancellor to maintain separation for tax purposes? But is there not a clear case for taxing joint family income—therefore at the highest rate—for the family on child benefit? If we do not believe in means tests—which I do not—surely that is the only way to deal with the principle underlying the noble Baroness's Question.

My Lords, I am sure that is a point which my right honourable friend the Chancellor is taking into consideration.

My Lords, the Minister's original Answer, which referred to benefit being universal, begs the question of whether or not that universal benefit is taxed. He will know from the debate which took place on Monday, to which my noble friend referred, that the noble Baroness, Lady Hollis of Heigham, spent some time explaining that the Chancellor's position on this issue was to sit on the fence, and, as far as one can see, to sit on the fence indefinitely. That point was made by the noble Lord, Lord Marsh. That may be comfortable or not comfortable for the Chancellor—I am not worried about that—but I am worried that it leaves many prudent parents with families uncertain as to how to plan ahead because they do not know what the Government will do. These issues are not terribly complex; the arguments on both sides are fairly straightforward. It is high time that the Chancellor made up his mind, and I hope the Minister will encourage him to do so.

My Lords, my right honourable friend the Chancellor has made up his mind so far as his commitment to families is concerned. The Government have decided to provide extra help for all families, with an increase of £2.50 in the standard rate of child benefit for eldest children from April 1999. There is more help for the youngest and poorest children. The matter raised by the noble Lord is being considered by the Chancellor. He will make his decision in his own time.

My Lords, does the Minister accept that the fairest way of tackling the problem of high income families receiving child benefit while avoiding the problems of taxing child benefit or undermining separate taxation for men and women is simply to tax higher incomes slightly more—for instance, a 50p top rate for those earning £100,000 a year? That would, even if untargeted, be a fairer approach and would avoid the problems.

My Lords, I am well aware of the views of the noble Baroness's party on taxation. The level of taxation is a matter for the Chancellor, not a matter for me.

My Lords, will the Minister tell the House how many married couples there are with children qualifying for child benefit who have a joint income of £200,000 or more? I should have thought they were rather thin on the ground. But perhaps I am living in a kind of deflated past.

My Lords, I have a very full brief in front of me; however, it does not include that figure. I shall have to write to the noble Lord.