Osborne signals an end to universal family benefits

Goodbye universal benefits. Goodbye tax credits too and hello to the Universal Benefit/Credit.

It is a longstanding piece of politics that some benefits are universal. It creates some sort of ‘buy-in’ from the wealthier in society. It is a statement of social solidarity.

Child benefit was the totem of that. It is, notably, paid to the mother. It is a survival benefit for the poor. Plenty of middle income people needed the money too. I have known rich people use the money to sponsor children in Africa. The prudent wealthy will lob it into a trust fund.

Today it stopped being universal. Higher rate tax payers are faced with a choice of telling the HMRC and then not having it paid in the first place, or ticking a box on their self assessment forms and have it taken back after the event.

This is a sop to the other great benefit of universal benefits. They are easy to administer. Just give the same amount to everyone. It is a reverse poll tax. By doing it in this way, the Treasury minimises the administration costs. There is no need for the form-filling mess of means testing. Instead everything can be calculated through the genius computer system known as PAYE.

A minister here told me “not to speculate” over whether the winter fuel allowance might face the same fate. Suffice to say, that although universal benefits are on the way out, and so is the tax credit system. All will be contained in an all singing all dancing operation known as the Universal Credit, which should really be called the Universal Benefit.

Lastly the benefits cap. £500 per week from 2013, roughly, is the limit. And about 50,000 large families, or other families with complicated arrangements, will be affected. It sounds like a tabloid winner for tomorrow’s papers. Mark my word, there will be some terrifyingly bad horror stories for the Coalition in that number. Not everyone who is paid a large amount of benefits fits the tabloid template.

This together with the housing benefit reform announced in the budget this will mean thousands of families may be forced to move from their homes, particularly in London. The coalition believes this is an issue of fairness. The working families should not be outcompeted by non working ones.

And lastly, there was an attack on bankers, amazingly clapped by the Tory faithful. We live in strange times.

To the Chancellor’s credit he did call for caps on the pay of bailed-out bankers when in opposition. Nothing happened though. RBS paid out over a hundred bonuses of over a million pounds last year. I can not imagine that he can cap benefits on the one hand, and then not cap the pay of bankers in institutions that only exist because of the taxpayer.