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News - 6 October 2010

Child Benefits Reform - Too harsh?

Child benefit is to be stopped for all higher-rate taxpayers from 2013 to help pay for a massive overhaul of the welfare system, Chancellor George Osborne has announced. He said stopping benefit for those paying the 40-50% tax rate would affect about 15% of families - around three million household - and will result in middle-class parents losing out to the tune of £1,055 a year if they have one child and almost £2,500 for three.

Child benefit will be removed from families where either parent earns enough to pay 40 per cent income tax - currently around £44,000. But two-earner households where neither parent's income is above this threshold will continue to receive the benefit - worth £20.30 a week for the first child and £13.40 for each additional one.

The measure would hit single parent and single earner families harder. A single parent receiving more than the threshold £44,000 will have their benefit removed but families with an income of almost £88,000 will still receive child benefit if neither parent earns more than the threshold of £44,000.

Announcing the plan ahead of his keynote speech to the Conservative Party conference in Birmingham, Mr Osborne said the measure was "difficult but fair" and would raise around £1 billion a year which will go towards paying the upfront costs of a new universal credit scheme, due to replace a range of other welfare payments over the coming 10 years.

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