Child benefit fudge will ease parents’ pain

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ABOUT 750,000 parents earning between £42,000 and £60,000 will hold on to all or some of their child benefit as a result of the Budget.

Chancellor George Osborne rowed back on controversial plans to scrap child benefit for all households where one parent earns enough to pay the 40 per cent higher rate of income tax, following complaints – including from Conservative backbenchers – that it would hit families in the “squeezed middle”.

Instead, the benefit – worth about £1,000 a year to parents with one child, £1,700 with two and £2,500 with three – will be withdrawn in April 2013 from those earning £50,000 or more.

And to prevent the “cliff-edge” effect created by the plans which he originally unveiled at the Conservative conference in 2010, the withdrawal will be tapered so families lose 1 per cent of their benefit for every £100 earned over £50,000.

Mr Osborne told MPs that only parents earning £60,000 or more will lose all their child benefit. About 90 per cent of all families will continue to receive the previously universal benefit, including 85 per cent who receive it in full.

The change will be funded by bringing the threshold for the 40p tax band down from £42,476 to £41,450, bringing 200,000-300,000 more people into that bracket.

However, Treasury sources acknowledged that the new arrangements would not get rid of the anomaly that a family with two parents earning £40,000 each will keep all of their child benefit with a total household income of £80,000, while neighbours where one parent stays at home and the other earns £50,000 or more will lose out.