Tax child benefit to beat poverty

By Tobias Benedetto

Child benefit increases could be paid for by taxing benefit for middle and higher earners to give a boost to the incomes of poorer families and reduce child poverty, a thinktank has said.

Child benefit is likely to be one of the key areas of spending targeted by the new government as it looks for ways to tackle the deficit. With the latest child poverty statistics due out today, analysis by the Institute for Public Policy Research (IPPR) argues that simply cutting it is not the answer.

Instead the thinktank recommends increasing child benefit to £22 a week for all children, but off-setting the cost by taxing this higher rate and removing eligibility to child tax credit (CTC) for better-off families.

IPPR claims this would reduce the value of child benefit for middle and higher earners while giving a boost to the incomes of poorer families and lifting 350,000 children out of poverty.

Carey Oppenheim, co-director of IPPR, said: “The new government should not simply use the enormous deficit as a reason to cut spending across the board. Our analysis shows that the value of child benefit can be reduced for those on middle and higher incomes, but using some of the savings to boost the incomes of the poorest families could help to tackle our shameful levels of child poverty.”

The institute argued that taxing child benefit may be preferable to introducing a means-test because means-tested benefits tend to suffer from lower take-up rates.