Child benefit will be frozen for the next three years. The rates will remain at £20.30 a week for an eldest child and £13.40 a week for each subsequent child. Effectively, the value of child benefit will go down because of inflation. A cut in real terms of up to 4% a year can be expected. According to Sally Copley, of Save the Children UK, freezing child benefit "will hurt the poorest families most, rather than their richer peers".
At present child benefit is universal and not means-tested. The take-up rate of child benefit has been approximately 96-97% over recent years. In 2009, according to Reform, child benefits to middle-class families cost the country £4,284m (defining middle class as a household where the total income equates to at least £15,000 a year for each adult and £5,000 per child). Reform shows 42% of child benefit is given to households not in need of the income. They argue that child benefit "is not only among the most expensive forms of middle-class welfare, with £4.3bn being paid to households not in need, but is also relatively regressive (with much of the benefit going to higher earning households)."
Clearly, George Osborne's decision to keeping child benefit universal makes no financial sense, although in his budget speech he explicitly stated his political motives: "I know many working people feel that their child benefit is the one thing they get without asking from the state." Considering that Osborne kept banging on about fairness and cost-cutting, this decision is ridiculous. However, rather than just complain about it, we have decided to do something to redress the balance.
The vast majority of higher-band tax-paying families – earning over £42,000 – claim child benefit. None of them "need" it, nor would be allocated that money under means-testing. Osborne has ruled out taxing this benefit. So the options are to keep it or not to claim it and leave it at the disposal of the government. Neither are attractive options, particularly in the current climate where working-class families are stretched for every penny. Even those of us who were children in Thatcher's Britain know that people fall through the cracks under a Tory government. That's why I am suggesting a third option.
I propose a system under which money can be directed to families who will be affected by the child benefit freeze. It could work in a manner similar manner to vote-swapping websites, allowing people virtually to "meet" one another and redistribute their child benefits. Alternatively, it could come in the form of a charitable trust allowing people who want to redistribute their child benefit to filter them through the trust to needy beneficiaries.
To achieve this, the scheme will need publicity and technical support. The aim is to make this as easy and attractive as possible to those families willing to sacrifice their benefit.
Osborne says that the freeze will ensure "that everyone, across the income scale, makes a contribution to helping our country reduce its debts". If you agree with his proposition and you support my proposal, please indicate your willingness to join me in doing something about it. If you would be prepared to contribute all or part of your family benefit, please contact me at redistributechildbenefit@gmail.com. I will report back in due course about the level of support received and how I mean to take this idea forward.