Child benefit and taxes

The announcement of changes to the child benefit wasn’t well handled and it is clear that some of the details will need to be ironed before the system changes in 2013, but that doesn’t make the policy wrong.

Susie and I have two children and receive child allowance even though I’m on a good income. We don’t really need the extra money but like many parents we will notice when the money goes. But remember that Child Benefit has to be paid for and it is paid for with taxes.

It wouldn’t be that hard for the government to protect this universal benefit, they could do it by putting up taxes and in doing so it would take money out of the pockets of the very same people who feel aggrieved at losing out. Also because government is inherently inefficient it needs to take much more from you than the £20.40 it gives you back.

6 responses to “Child benefit and taxes

  1. With the average salary in London not far below £44k per year most families in London will be worse off under these plans. I completely agree with the idea of means testing child benefit, but the threshold seems unfair, especially for single parents in London.

    While we still have charitable status for public schools, which benefits the richest families (and I'm not talking about families on £44k) then the government is still taking money from the pockets of average earners to subsidise better education for the rich, perpetuating the gap between rich and poor for another generation. If the government really cared about stopping average earners subsidising benefits for the wealthy they should start here.

  2. Tough but fair?

    This is tough for sure. If we were 'all in it together' it might be slightly more palatable. But it clearly not fair at all

  3. Jimmy – You seem to be very confused. Yes Public schools have a tax advantage in being Charities.

    But the amount the state saves in not paying for a state education for privately educated children vastly exceeds any slight – and very slight advantage that they get by their charitable status.

    There are many stupidities in the tax and benefits system which need addressing. I welcome the principal of the changes already proposed – although have some concerns about the practicalities but do firmly believe that in making changes we must also minimise the administration costs which this does. The problem with many means tested benefits is the admin costs are often as high as an saving my the means testing

  4. It is possible I am slightly confused. As I understand it public school fees can be as much £30k per year. As this is a charitable contribution UK higher rate tax payers can claim 40% of this back as a tax rebate – that works out as a £12k subsidy per pupil attending the top public schools. In addition the school gets additional money from the government under the same scheme, I'm not sure whether this would be at the standard 20% or up to 40%.

    The cost per pupil of state education is about £6k per year. So the state is paying at least twice as much for a child to attend Eton as the local state school.

    Am I very confused or have I got it about right?

  5. Clearly I am confused. I checked the rules regarding gift aid and fees do not qualify for gift aid, so much of my previous post was incorrect.

    Charitable status of public schools apparently costs tax payers about £100m per year – a small fraction of the cost of sending these children to state schools – as James has already stated. But it remains a £100m subsidy to some of the richest people in the country who choose to opt out of the state sector and I believe that this £100m could be better spent on improving schooling in the most deprived areas or in some of the BSF projects scrapped by Michael Gove.

  6. Jimmy,

    If the Gov remove the charitable status of private schools a significant number become financially untenable and be forced to close.

    Quite a few have already done so because the current economy means a number of parents can no longer afford the fees.

    When this happens it puts pressure on the local education authority because they have to educate more kids with the same budget. This has happened in Bromley recently and caused a budget headache. Remember the people who send their kids to private schools also pay for state school places that they then don't take up.

    If it were to happen on a large scale there would be increased costs to the education budget nationally and this would cost a lot more than the tiny value of lost tax revenue from the schools' charitable status.

    The big question is how the private sector can produce such significantly better results than the state sector at about the same cost per pupil?

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