Child benefit cuts could be “unenforceable”

The Deputy Editor of the Wall Street Journal Europe, Iain Martin, quotes a Treasury source as saying that the plans to axe child benefit for higher rate taxpayers will be ditched before they come into force in 2013.

Martin questions the government’s ability to monitor household incomes when in most cases, the benefit is paid to the mother, who is “under no obligation to tell the father she receives it”.

The key problem is alleged to be: How can the government easily prove the connection between mothers who are not themselves higher-rate taxpayers and the higher-rate taxpayers they might live with?

“And then keep tabs on the situation on a monthly basis for almost two decades,” writes Martin, “with millions of taxpayers involved (moving in and out of work, having new children, some separating, getting divorced, finding new partners who may or may not be higher rate taxpayers, etc).

“It’s easier to stop the mother getting the benefit if she herself is a higher-rate taxpayer. It could be done via her tax code. But if she’s not, how good will the government be at establishing whether she is living with a partner paying tax at 40%?”

The Government is also facing a row on another benefit reform, after London Mayor Boris Johnson said he would not accept "Kosovo-style social cleansing" in London as a result of housing benefit changes. 

Housing Minister Grant Shapps told Channel 4 News the language used by the Mayor was "not sensible".

‘Nonsense’

But Chief Secretary to the Treasury Danny Alexander has dismissed the reports as “nonsense”.

“This is a nonsense story, it is completely enforceable.” Danny Alexander, Chief Secretary to the Treasury

Questioned over the report int he Commons, he said the cut to the benefit – which will save the taxpayer £2.5 billion a year by 2014-15 – was “completely enforceable” and would go ahead “as planned”.

His comments were in response to his Labour shadow, Angela Eagle, who referred to the Wall Street Journal report’s claims that the Treasury was struggling to find ways to make the the plan work.

‘Unenforceable’

Ms Eagle said: “There are press reports saying that a source in HM Treasury is saying the child benefit cut is unenforceable and will be dropped.

“The press report is saying it is panic stations at the Treasury. Is this true?”

But Mr Alexander said: “This is a nonsense story, it is completely enforceable.

“The savings were signed off by the Office for Budget Responsibility, they considered the compliance risk as well and higher rate taxpayers of course are required to disclose all relevant information.”

The government’s own projections forecast that the withdrawal of child benefit will save £2.4 billion in 2013-14. It also forecasts a loss of only £60m due to fraud or “undetected non-compliance”.

But the government’s own published documents admit that the size of that fraud is “subject to significant uncertainty”.

The child benefit cuts were outlined at the Tory Party Conference earlier this month as part of the biggest overhaul of the welfare system in 60 years.