Britain Cuts Child Benefits for Wealthier Families
By LANDON THOMAS, Jr.
LONDON — In an abrupt policy reversal, Britain’s chancellor said Monday that the government would stop paying a universal child benefit to wealthier families.
The decision, announced by George Osborne at the Conservative Party conference in Birmingham, would take effect in 2013. It departs from a campaign promise to not perform a means test for recipients of this hugely popular benefit and represents perhaps the most direct attack yet on the rich menu of middle class benefits that has long underpinned European welfare states.
Mr. Osborne said that families making 44,000 pounds per year — about $70,000 — would not qualify for the benefit, which pays 20.4 pounds per week for a first child and 13.40 for subsequent children.
“A system that taxes working people at higher rates only to give it back in child benefit is very difficult to justify at a time like this,” Mr. Osborne said. “We have got to be tough but fair, and that’s why we will withdraw child benefit from households with a higher rate taxpayer.”
The program was put in place after World War II to encourage fertility in a depleted nation but now costs close to 12 billion pounds a year, or $17 billion. Analysts say that as much as 42 percent of this amount goes to middle and upper class families that are not in need.
The British government is in the midst of conducting a spending review aimed at cutting 83 billion pounds or about $131 billion over the next four years in order to bring down its deficit, which at about 11 percent of gross domestic product is among the highest in Europe.
The move on middle-class benefits is part of a broader push by the government to redo the welfare system in Britain. Unlike the United States, unemployment and disability benefits here are permanent, and as a result more than 5 million people in the country are being paid not to work.
In his speech today, Mr. Osborne said the government would also cap benefits for working families at 500 pounds per week, or about $790.
The Conservatives have been under pressure from their left-leaning coalition partner, the Liberal Democrats, to take a knife to middle-class payouts in order to prevent deeper welfare cuts that would hurt the poor.
Although the 1 billion pounds in savings is a drop in the bucket in terms of closing a deficit of 178 billion pounds, symbolically it packs a far more potent punch as it suggests that other universal benefits that have disproportionately benefited the middle class such as heating allowances as well as free bus passes and television licenses for the elderly might also be vulnerable.
Under the previous Labour government these benefits grew in scope and breadth as British government spending reached record highs during the boom. But with a debt of 71 percent of gross domestic product, a consensus is forming that such generosities are no longer affordable.
Such cuts will also deepen the dividing line between the government and the opposition, which has recently crowned a new leader, Ed Miliband, who has promised to move the Labour party leftward.
The decision, announced by George Osborne at the Conservative Party conference in Birmingham, would take effect in 2013. It departs from a campaign promise to not perform a means test for recipients of this hugely popular benefit and represents perhaps the most direct attack yet on the rich menu of middle class benefits that has long underpinned European welfare states.
Mr. Osborne said that families making 44,000 pounds per year — about $70,000 — would not qualify for the benefit, which pays 20.4 pounds per week for a first child and 13.40 for subsequent children.
“A system that taxes working people at higher rates only to give it back in child benefit is very difficult to justify at a time like this,” Mr. Osborne said. “We have got to be tough but fair, and that’s why we will withdraw child benefit from households with a higher rate taxpayer.”
The program was put in place after World War II to encourage fertility in a depleted nation but now costs close to 12 billion pounds a year, or $17 billion. Analysts say that as much as 42 percent of this amount goes to middle and upper class families that are not in need.
The British government is in the midst of conducting a spending review aimed at cutting 83 billion pounds or about $131 billion over the next four years in order to bring down its deficit, which at about 11 percent of gross domestic product is among the highest in Europe.
The move on middle-class benefits is part of a broader push by the government to redo the welfare system in Britain. Unlike the United States, unemployment and disability benefits here are permanent, and as a result more than 5 million people in the country are being paid not to work.
In his speech today, Mr. Osborne said the government would also cap benefits for working families at 500 pounds per week, or about $790.
The Conservatives have been under pressure from their left-leaning coalition partner, the Liberal Democrats, to take a knife to middle-class payouts in order to prevent deeper welfare cuts that would hurt the poor.
Although the 1 billion pounds in savings is a drop in the bucket in terms of closing a deficit of 178 billion pounds, symbolically it packs a far more potent punch as it suggests that other universal benefits that have disproportionately benefited the middle class such as heating allowances as well as free bus passes and television licenses for the elderly might also be vulnerable.
Under the previous Labour government these benefits grew in scope and breadth as British government spending reached record highs during the boom. But with a debt of 71 percent of gross domestic product, a consensus is forming that such generosities are no longer affordable.
Such cuts will also deepen the dividing line between the government and the opposition, which has recently crowned a new leader, Ed Miliband, who has promised to move the Labour party leftward.
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