Child benefit rammy – a lone parent enters the fray

An open letter to well, everyone:

Unaccustomed as I, and the UK’s other 1.9 million lone parents are – no really, we are unaccustomed to having so many positive things said about us by politicians, journalists and commentators.  Normally, we are trotted out as your favourite demons for all our ills in relation to unruly children, poor educational attainment, crime etc.  So it is a little bemusing to hear so many of you suddenly concerned for us and our children’s welfare.  Allow me then, as a token lone parent, to challenge a few of the myths being spun in this rammy:

  • pity the poor lone parent – a widow even – earning £45,000 per year who will lose her child benefit while a two parent family earning £80,000 will get to keep theirs

I’m sorry but who is this mythical creature?  Do you know her?  You see, most lone parents I know don’t earn anything like this much.  In fact, most are poor.  Half of all children in our families are poor compared to a quarter of children in two parent families.  Of those lone parents who work, 29% who work part time are poor and just over a fifth who work full time are poor.  The median weekly income for working single parent families is £404.52 or £21,035.04 per year.  Incidentally, the median income for a two parent family with one worker is £618.44 (£32,158.88 annually).  There may well be some lone parents caught by this change but they are few and far between.  This is a spurious argument being deployed to justify the continuation of payment of a universal benefit to people who can afford to do without it.  Kindly desist.  (all statistics are from Households below average income: an analysis of of the income distribution 1994/5 – 2008/09, DWP 2010)

  • this is the first time child benefit has been changed

Actually it’s not.  The last change was a wee while ago now and many of you won’t remember.  But I do, and in fact, I blogged about it earlier this week.   Not convenient I know for Labour MPs and commentators now you’re in opposition but you have form here.  Be assured:  that change to child benefit hurt many more lone parents for a lot longer than this one will. 

  • the Conservatives have got this very wrong

Actually the Conservatives might just have a point.  So far, an awful lot of pain in terms of welfare and tax changes has been aimed at lower income families, and no doubt there is more to come.   The Institute of Fiscal Studies’ analysis made this clear and again, I blogged about it.  Frankly, it’s about time the better off took a hit.  And no, I don’t feel entirely comfortable with finding myself in agreement with George Osborne.

  • can we really afford to maintain universality in our benefits system?

I would always opt for universality over means testing but frankly, it might just be a luxury we can no longer afford.  That’s why the press release on this issue from Gingerbread puzzled me.  Yes, the charity exists to provide support to all lone parents but who is its main constituency?  Low income lone parent families.  Has the organisation fully thought through its opposition to this change and what the alternative might be?  Imagine if the Conservatives back down on this change but instead propose to remove child benefit, say for, second and subsequent children?  Child benefit would still be universal, just much more limited in scope.  How many low income lone parent families would be hurt by that?  Exactly.  Would you all be jumping up and down with the same indignation as on this change?  I wonder.

  • the re-introduction of a married couples allowance might help offset some of the pain

You don’t really need me to explain why this won’t help lone parents, do you?

Yours,

a mightily fed up lone parent who wishes you would all just have the honesty to admit that the sort of families most likely to be hurt by this change are your own

9 thoughts on “Child benefit rammy – a lone parent enters the fray

  1. I agree with much that has been said but it is fanciful that the single mother on £45k is living the life of riley. For a start (unless she’s somehow stumbled on unearned income) if she’s at work she’s shelling out for childcare, paid out of already taxed pay (oddly paying an accountant is tax deductable if you are self employed – child care is not) so her net income is far far lower than that of the couple who generate the same income but only pay 20% of it to the tax man. (she’s also staying up every night to cook and clean as she hasn’t time in the day or money to pay).

    So let’s look at the numbers. My hypothetical working single mothers (of which I am one) have only one child – as let’s face it we can barely hold together working and looking after one child let alone more?

    Single mother a

    Earned income (gross) £46,000
    less
    Tax/NICs £15,810
    childcare cost £14,500
    sub total net income £15,690
    child benefit 1055.6
    total net income £16,746
    child benefit as % of total 6.30%

    Single mum a earns £46k. As she’s a talented girl she manages to do this in three and a half days and only pays for that much childcare (london rates around £11-12 an hour if you’re paying their tax – which you should and have to – it’s a market). After tax and childcare costs she’s got £15,690. With child benefit for one child that’s £16,746k. when CB goes she’s losing 6 percent of that – quite a cut for someone a long way from the top of the pile.

    Single mother b
    NOT AFFECTED
    Earned income (gross) £42,000
    less
    Tax/NICs £8,171
    childcare cost £14,500
    sub total net income £19,329
    child benefit 1055.6
    total net income £20,385
    child benefit as % of total 5.18%

    single mum b is cannier. Her gross earnings are slightly lower – so she’s paying less tax and so £3639 better off already and she’ll keep her child benefit and end up £4695 better off than her higher earning sister..

    But let’s compare that couple with their equivalent earning single mother neighbour.

    couple x one earns 42K other earns 23k
    NOT AFFECTED
    Earned income (gross) £65,000
    less
    Tax/NICs £10,931
    childcare cost £14,500
    sub total net income £39,570

    child benefit 1055.6
    total net income £40,625
    child benefit as % of total 2.60%

    So couple X and doing well. One earns £42k, the second £23k so each is taxed at 20%. Unlike the single mum however they have two personal allowances so have £12,950 of untaxed income rather than £6745 (so remind me why they need an extra married couple’s allowance?) Even after the cost of childcare they keep £39,570 of their income. And they get to add child benefit and keep it!!

    But the single mum on the same income isn’t so comfy
    single mother c
    Earned income (gross) £65,000
    less
    Tax/NICs £23,410
    childcare cost £14,500
    sub total net income £27,090
    child benefit 1055.6
    total net income £28,146
    child benefit as % of total 3.75%

    She’s paying twice as much tax on a smaller income (as she only has half the tax allowance) so after tax and childcare costs she ends up with £27,090. Today she gets child benefit – but unlike her neighbours she’s losing it. And yes two mouths eat more than one but £12,500 more??

    So let’s see if our single mum can catch up – how much would she have to earn?

    well at first glance it’s £86k but wait and see

    Earned income (gross) £85,800
    less
    Tax/NICs £31,730
    childcare cost £14,500
    sub total net income £39,570
    child benefit 1055.6
    total net income £40,626
    child benefit as % of total 2.60%

    But I don;t think she can do that part time

    so (see below) she needs 40 hours of childcare at £11 an hour (yes it’s expensive but she’s not going to earn that outside london and that’s what it costs). So child care goes up to £22k knocking her income back down again so she’s £7500 behind the couple again.

    Earned income (gross) £85,800
    less
    Tax/NICs £31,730
    childcare cost £22,000
    sub total net income £32,070
    child benefit 1055.6
    total net income £33,126
    child benefit as % of total 3.19%

    So can she ever catch up? (see below) not until she’s on nearly £99k – and that only just brings her level with a couple on £34k less and she never sees her child.

    Earned income (gross) £98,300
    less
    Tax/NICs £36,730
    childcare cost £22,000
    sub total net income £39,570
    child benefit 1055.6
    total net income £40,626
    child benefit as % of total 2.60%

    so what’s the answer – sure cut child benefit but let child care costs be taken into consideration in allowances against tax. Is that reallly fair change likely to happen? no.

    • Wow! I’m impressed. This is an outstanding financial assessment of the lot of lone parents. For a similar situation would arise if comparing earners in lower income bands too. And your analysis absolutely points up the need to look at work/family policy in the round, especially the iniquitous costs of childcare. I recall that a few years ago, more than half of my net income was taken up by childcare costs and mortgage payments. It was soul-destroying.

      I do not – and would not – suggest that a high rate taxpayer parent is living the life of riley. Remember I am a lone parent, I am only too aware of what life is like.

      Of course, missing from all our comments is the absent parent. It was always thus! And their responsibility to make appropriate financial contributions towards their children – it is after all not counted as income for tax or any other purposes. It would be nice to think that a government – any government – one day would sort this issue, and the CSA or whatever it is called these days out. But I won’t be holding my breath.

      Thanks for your fabulous comment and analysis. And let’s get the campaign going for tax deductible childcare. It would be a start…

  2. Couldn’t agree with you more. The number of people complaining who so don’t need the money is unbelievable. That said, I feel faintly aggrieved because it feels like it discriminates against stay-at-home-mums, although I take your point that even to have one person in the house earning £45K is not to be sniffed at. I just hate anything that makes mums feel like they “have” to go back to work when the childcare options for their kids are so grim…..

    • It’s a fair point to make but striking that the same “right” to stay at home to raise their children, is not something society – politicians primarily – do not allow many lone parents. In fact the rules have just changed to push them back to work and off benefits when their children reach the age of five. It would be nice to think that this rammy will put the broader issues of childcare and staying at home to raise children on the agenda but I doubt it. I live in an area where day in day out, I see people struggling to raise families on incomes much less than £45k or even £40k, most of them in work. They are the ones going to be hit hardest by a whole raft of changes to tax credit etc and the likes of mumsnet were almost silent on the matter. The hypocrisy bothers me!

  3. I do agree with a lot of what you say, but just on the point of single parents earning around that amount or just over, I do know quite a few, including my dad.

    On principle this isn’t a terrible cut, there are much worse things to be cut, but my concern is that they are trying to sneak in marriage incentives through the back door. I also find it troubling that they want to offset it with marriage tax breaks as this helps not at all those single parents, who, again, definitely do exist.

    Here’s my thoughts if anyone’s interested:

    http://lefteyerighteye.wordpress.com/2010/10/05/in-the-dock-george-osborne/

    • Thanks for the comment Louise and for adding to the debate. Thanks too for providing the link to your excellent, thoughtful post on it all. If we can thank George Osborne for anything this week, it is for injecting a bit of passion into politics and getting us all talking and discussing the pros and cons of cuts measures. That can only be a good thing. Though I would of course be more heartened if we were all getting more worked up about the cuts that have and will befall poorer families. We shall see!

  4. I’m not comfortable with the whole single parent thing in regard to this issue. It’s kind of missing the point I think.

    A family with a full complement of working parents might well take home £60K a year with neither troubling the £44K threshold. This family will get their benefits and it’s all good.

    But what of the family, again with both parents in place, who also earn £60K but one partner bags the lions share of this at £50K? Not only would they be paying more income tax, they would also lose their child benefits.

    Both families have the same numer of kids, same age, live in the same area yet one fares significantly worse.

    I know that means testing is burdensome but it’s got to be better than this proposal, surely.

  5. Perhaps though the unfairness is where a couple earning £80k don’t lose their CB whereas a couple living next door where only one partner works and earn little over half their neighbours lose theirs.

    And there are numerous dodges too in the Tories proposals. A couple who run a business for example where only one partner works can allocate earnings to their partner to keep them under the threshold.

    Whilst someone earning £50,000 or so is obviously doing fairly well, if the government is going to concentrate its efforts on bludgeoning that echelon of the workforce to balance the books then it’ll come back to haunt them.

    Means testing CB on household income is the only fair way.

    The current proposal is unfair in the same way that the poll tax was unfair I’d contend.

    And sorry to be an old stick in the mud but I know at least three of your mythical creatures!

    • Hi Rab

      Thanks for your comments. Any means test or cut off point introduces a level of unfairness. For example, the introduction of age dependent benefits immediately introduces an anomaly where people’s entitlement to things like free personal care, winter fuel allowance etc is not predicated on need but on an arbitrary barrier beyond which some get and below which others don’t.

      And while there are many burdens on the self-employed there are always tax avoidance measures that can be deployed to make the system on benefits like these work to their advantage.

      I don’t think this measure amounts to bludgeoning – I think the Tories are doing more of that to people on much lower incomes. Everyone has to contribute to trying to balance the books. I accept my contribution, those on higher incomes need to do so too.

      And yes, the mythical creatures do exist, but just in very few numbers. The right and left wing media and commentators have misappropriated lone parents to further their own arguments in this debate without actually understanding the reality of most of their lives. If I were the Tories, I’d be tempted to exempt widows and widowers from the change, it would remove an emotional totem from the debate immediately.

      Your points are well made, and I appreciate you contributing them to the debate – unlike many, they generate light not heat!

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