Thursday, 5 March 2015

Tip top tokenist Tory tinkering.

From the BBC:

The Conservatives are considering limiting child benefit to three children, BBC Newsnight has learned… It would save an estimated £300m a year - but Tory MP Dominic Raab said it was not purely about cost but could "send a message about personal responsibility"…

Child benefit can be claimed by anyone responsible for a child under 16, or under 20 if the young person is in education or training - though since 2013 there have been restrictions for families where one parent earns more than £50,000 a year. It currently pays £20.50 a week for a first or only child, then £13.55 for other children.

Deliberately ignoring the elephant in the room as per usual.

Child Benefit is (or was) a splendid benefit, it was small amounts of money (nowhere near the average cost of bringing up a cd) but everybody gets it (until recently when it was withdrawn for higher earners). The total nominal payout is about £10 billion a year and fraud, error and admin costs are so small as to be barely measurable.

The cash value is nowhere near the average cost of bringing up a child (the bulk of which is loss of mother's wages) so eases the pain a bit without actually distorting behaviour.

The biggie is Child Tax Credits, up to £53 a week per child plus bits and pieces, which is a total payout of about £25 billion a year, the bulk of which goes to a small number of large families with low or no (declared) income.

For second and subsequent children, the extra cash you get from having another child is £66, which is probably more than the marginal cost of bringing up a second or subsequent child. If a mother is at home and not in paid employment, then the loss off her wages is a sunk cost. So this does distort behaviour quite a lot.

Fraud, error and overpayments are endemic; admin costs are enormous and they put a sadistic amount of effort into clawing back overpayments from randomly selected people. And it is savagely means-tested, of course.

Now, if you chuck Child Benefit and Child Tax Credits in the pot and divide it by the number of eligible children, it comes out to about £55 per child per week (see pages 8 and 9 of the Citizen's Income Trust booklet), without the need for means testing and so on, which seems fair enough to me.

If you want to cap this at three or four children per family/mother to "send a message about personal responsibility" then that also seems fair enough; any 'savings' from doing so are minimal in the grander scheme of things (£1 billion a year, perhaps?) but possibly worth having.

The other good thing about having a flat rate amount of £50-odd per child per week is that it sorts out the so-called gender pay gap, which is actually a mothers-vs-everybody else pay gap. If you means-test it, then you leave the pay gap as it is.


James Higham said...

a sadistic amount of effort into clawing back overpayments

Very much so. What is lost with government 1997 to 2015 is a sense of proportion and first principles - what on earth something, e.g. CB, is meant to achieve.

Mark Wadsworth said...

JH, correct. It's all about posturing and creating jobs for civil servants nowadays, thereby achieving less of what they are supposed to be achieving.

Bayard said...

This is, of course, a thinly-veiled attack on the poor, who are seen to be the ones having large numbers of children (and are probably also immigrant Romanian gypsies living in a mansion on the dole in the public imagination). Of course, what is also never pointed out by the Tories is that it is only the tendency of the less well-off to have lots of kids that has meant that our "demographic timebomb" is a lot less bad than France's or Italy's.

Mark Wadsworth said...

B, no, cutting child benefit for families with more than three kids is a not-at-all-thinly veiled attack on families with more than three kids, regardless of income (see also - taking away Child Benefit from higher earners, the bastards).

Cutting Child Tax Credits would be a pretty outright attack on "the poor".

Bayard said...

True, but the popular perception is families with more than three kids = poor families (also Romanian gypsy immigrant etc.), so while this is actually an attack on large "hard-working" families also, I am sure that the Tories must be pretty certain it's not going to be taken as such.

mombers said...

What about clawing back child benefit from people who had high incomes in the past and used their CB to buy nice family homes that are now worth eleventy billion pounds?