The Edge

Richard Northedge takes on corporate finance

Curbing child benefit is the start to reform

The furore over curtailing child benefit shows how hard it will be to reform the welfare system. A swathe of the middle-class that thinks other people should be denied state benefits complains vociferously when their own payments are threatened.

We need to remember what welfare benefits are for. They are for the poor. That’s not people earning £60,000 a year – nevermind couples with combined six-figure salaries who think the state should subsidise the upkeep of their children (ie, the upkeep of their own lifestyle).

It is madness to tax people on £25,000 a year and give the money to people earning twice as much. The higher paid should be putting money into the public pot, not taking it out.

A crude rule for a welfare system is that people either pay tax or receive benefits – not both. If most child benefit goes to people who are working then it is going to the wrong people.

Giving money to the government and receiving it back again is inefficient. The state is a leaking bucket: each pound paid in is likely to allow only 80p to be paid out because of bureaucratic costs. It is better that people – especially high earners - spend their own money rather than allow the state to do it.

Yet limiting child benefit should be only the start of welfare reforms. Curbing the rise in payments to 1 per cent has produced similar squeals – even though the rising benefits are financed by taxpayers who may well have falling incomes. The government needs to differentiate between universal benefits that have been paid for by the individual – such as education, the NHS and old-age pensions – and those that are essential to support those without financial resources.

It follows that benefits should provide sustenance rather than luxury to encourage those who can move off benefits and support themselves to do so.  And if the nation’s benefits bill can be slashed – not limited to a 1 per cent increase with the well-paid excluded – then taxes can fall and the people lucky enough to earn £60,000 will be able to keep more of their own money to spend on their children.



4 comments on “Curbing child benefit is the start to reform”

  1. Sam says:

    Abso-bloody-lutely …. since when did the benefits system stop becoming a safety net? Defending the benefits to the poorest in society is one thing, but defending the benefits received by anyone earning above the national average wage is an outrage.

  2. Kay says:

    Unfortunately the system is not set up to help get people OFF the system. if they work they lose their benefits, so instead they lie and get paid under the table. The system encourages them to have another child, then another. It does not encourage work but the lack of it. It supports meth addicts, alcoholics, and smokers. But those elderly who don’t have enough to live on don’t qualify (even at under the poverty level).The system tends to help those who know how to use the system, not those who really need it! I know I am one of those.

  3. Janet Tucker says:

    My parents never got child benefit for me when I was growing up in the 1960’s and 70’s, as you did not get child benefit for the first child. We lived in a council flat because my father’s wage was not enough to get a mortgage and we probably were below the poverty line. My parents always managed to make ends meet and I guess probably went without in order to make sure I had enough throughout my childhood. In today’s benefit system they would have had child benefit, council tax and housing benefit paid to them. They never claimed anything except their old age state pension when they reached retirement age. We couldn’t afford a car so went everywhere by public transport. My parents were the sort of people the benefit system was created for not these people who are better off on benefits than going out the work.

  4. Billie Corton says:

    My parents were like that too, and most people who live on or near the poverty line today are no different. These people who are better off on benefits than going to work are almost entirely a convenient fiction created by the tabloid press. Most people who are on benefits are either out of work because they have been made redundant or their company has closed, or they are at work but on such low wages that they have to be ‘topped up’ by us the taxpayer, while often their corporate employers find ways off offshoring and avoiding contributing their share of tax. These convenient hate figures live their drug-fuelled high-life behind drawn curtains on the princely sum of £71 a week! Wow! Just think of the champagne you can guzzle on that! Sadly, we have become such a ‘two nations’ nation that most comfortably off people have absolutely no idea of the level of benefits poor or low-paid people get, they just believe any old rubbish they read in the Sun and the Daily Mail. Shame on you for not looking out for your poorer neighbours. Like Disraeli said, “(We are) Two nations between whom there is no intercourse and no sympathy; who are as ignorant of each other’s habits, thoughts, and feelings, as if they were dwellers in different zones, or inhabitants of different planets. The rich and the poor.”

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