Budget 2012: Child benefit lost for families earning more than 60,000

In his budget speech today, Mr Osborne announced plans which will bring in means-testing for child benefit for all families.

Families will begin to have their child benefit reduced when one parent starts to earn more than £50,000.

Child benefit will fall by 1 per cent for every £100 earned over £50,000 and those households where someone is earning more than £60,000 will lose all of the benefit.

The Chancellor had been under pressure to re-think controversial plans which were due to be introduced next January, which had been roundly criticised for being unfair because families with both parents earning just under the higher-rate tax threshold, with a household income of more than £80,000 a year would keep the benefit, but a family with one parent earning just over the threshold would lose it.

Mr Osborne said that the change to child benefit would avoid the ‘cliff edge’, which would have meant that families would have had their child benefit completely withdrawn all at once.

‘An extra 750,000 families will keep some or all of their child benefit and 90 per cent of families will remain eligible,’ Mr Osborne said.

However, the plans announced in today’s budget still mean that access to child benefit will still be based on individual parental income, rather than household income, a move which has also been criticised.

Anna Bird, deputy chief executive of the Fawcett Society said she was disappointed that the Government had decided to end child benefit for all families.

 ‘The decision to means test child benefit marks a historic break with the previous consensus that such a benefit, typically spent directly on meeting the needs of children, should be universal,’ she said.

‘Regardless of where you draw the line, restricting who gets child benefit ushers in a new era in our understanding of the role of the state in supporting children and those who care for them.'

She also said that it was unfair that only higher earners with children should have their incomes affected.

‘While the Chancellor is right to claim that higher rate taxpayers must do their bit for deficit reduction, it is unfair that only those higher earners with children should see their incomes affected.

‘Given that the Government has chosen to proceed with this policy, we welcome the tapering measures introduced by the Chancellor to smooth the cliff edge effect for higher earners in the withdrawal of child benefit. However, the measures announced today will do nothing to challenge the unfairness that means a couple whose combined income is below £100k will lose less than a family where only one parent works earning just over £50k.’