Child Benefit should be universal

Child Benefit in the UK used to be a virtually universal benefit given to all children regardless of their parents’ financial situation. But in 2013, the then Government introduced the High-Income Child Benefit Charge (HICBC), making individuals who have an income of £50,000 or higher pay back some of the amount by filing a tax return at the end of the financial year. For parents earning over £60,000, the amount they must return is equal to the entire Child Benefit. The HICBC is a controversial policy that has been widely criticised for placing a higher marginal tax rate on families with children, for generating complicated administrative burdens for parents, and for unfairly benefitting double-earner households over lone parents.

The HICBC undermines the very essence of child benefit as a universal entitlement. In doing so, it fails to recognise that all children have a right to an adequate standard of living independent of their parents’ income. But it is also a highly ineffective charge, that works in practice as an additional tax affecting only families with children. Because the threshold has been frozen since its introduction over ten years ago, more and more families are unable to claim Child Benefit every year as inflation has continued to rise. When it was first introduced, the HICBC affected one in eight families in the UK. It will soon affect nearly one in three, or 2.5 million households.

Two groups are particularly impacted by the HICBC. The first group are  parents whose income is below £50,000 or who are not earning an income, who should therefore be able to claim the benefit in their own right, are unable to do so if their partner is earning above the threshold. Mothers are disproportionately impacted by this policy because they are more likely to be the primary carers of children, the lower earners in couples, and the ones to take time off work or lower their hours to account for the time spent on unpaid care.  

Importantly, parents who claim Child Benefit are credited with National Insurance contributions even if they are not earning an income, which means that when women give it up due to having a higher-earning partner, their future state pensions can be affected. In addition, the HICBC ignores the fact that household resources are not necessarily shared equally between parents, and in situations of economic abuse, withdrawing access to an independent income could have serious consequences for mothers and their children.

The second group disproportionately impacted by the HICBC is lone parents who earn an income above the threshold. While £50,000 is significantly more than the average salary in the UK, the rising cost of living and unaffordability of childcare is making it increasingly difficult for lone parents, 85% of whom are women, to balance their finances. For a lone mother working and living in London, rent will on average absorb £1,650 of her income for a two-bedroom flat, she’ll pay on average £186 for her energy bills, and on top of this she’ll spend an average £1,709 for a full-time nursery place, adding up to roughly £3,545 in living and childcare costs. A salary of £50,000, with a monthly take-home pay of about £3,100 after tax, does not even begin to cover the costs associated with raising a child. Lone parents need extra support, not a higher tax rate than taxpayers without children.

The HICBC should be scrapped, but this alone is not enough to fix the issues with the current Child Benefit. The amount of Child Benefit parents can claim has fallen in value in real terms since 2013, and it currently sits at just £24 per week for the first child. Many OECD countries increase the amount paid with every additional child in the acknowledgement that having more children costs more, not less. Yet the UK’s Child Benefit decreases to £15 per week for any additional children after the first. This diminishes the effectiveness of Child Benefit. Alongside scrapping the HICBC, Child Benefit should be raised to £50 per child per week and it should be given at the same flat rate for all children.

The Chancellor still has the opportunity to address these problems at the Spring Budget this week. Returning to a universal Child Benefit and raising the amount provided would be a welcome reform, and a first step in the right direction. For a truly impactful Budget announcement, we urge the Chancellor to conduct a holistic review of social security, taxation, and our social infrastructure, aimed at reducing inequalities and providing income security for all.