The Chancellor's announcement today that Child Benefit will be taken away from families with a higher-rate taxpayer in them is a big step in the right direction. This is an example of a fair cut.
Nevertheless, it will be administratively complicated. The Child Benefit system and the income tax system don't talk to each other very much, so it will take a lot of work by some bright sparks in Revenue & Customs to work out how to make this happen without creating a lot more paperwork.
But more intriguingly, today's announcement sits very oddly with the Work and Pensions Secretary's plans to simplify the benefit system, about which we heard a lot yesterday. How can you have one simplified benefit taper if Child Benefit eligibility is based on not having a higher rate taxpayer in the household?
The answer, of course, is that this is an interim step. If Iain Duncan Smith's reforms come off, what remains of Child Benefit will likely be rolled into the successor system. That would mean families earning more than about £30,000 per year could see their Child Benefit stopped, saving the government about £6bn per year. Today's move is, in other words, the beginning of the end for Child Benefit.
Such a reform would be the fair thing to do. But since that's where we're heading, the government should bite the bullet and means test Child Benefit through the tax credits system from next year. This would save more money earlier, be fairer, and prevent the system getting even more complicated in the meantime.
Ian Mulheirn is the director of the Social Market Foundation
