Chancellor George Osborne has announced the first of what looks set to be a long line of wide-ranging and unpopular cuts to public sector spending in an attempt to curb the national deficit. Speaking at the Conservative party conference last week, Mr Osborne announced that from 2013 families where one or more parent pay the higher rate of tax (currently £43,875) would lose their child benefits, a system that has been available universally since the end of the Second World War.
Critics were quick to point out an apparent oversight in the system, whereby two parents earning just under the boundary (at roughly £40,000 each, meaning a household income of £80,000) would be able to retain their benefits, whilst a single breadwinner family earning £44,000 would lose out. Whilst this is suggested to only affect 15% of families currently claiming, those on or near the boundary may have to face taking pay cuts to compensate for wage levels rising between now and when the policy is implemented.
The new policy took many by surprise, both inside the party and out, and seems a potentially risky attack on the vaguely-defined ‘middle class’ that the Conservative party has traditionally held support with and counted on in this years general election. The benefit amounts to roughly £1,000 a year for the first child (and roughly £700 for each subsequent child), and Mr Osborne hopes to save £1bn through the implemented cut. The actual figure saved is likely to be initially unclear, as details on the actual implementation of the policy at this time are said to be unknown to those spoken to at the Inland Revenue.
The political strategy of the move seems to be designed to weaken or deter, to some extent, Labour attacks portraying the Conservatives as a party unwilling to target the richer in society. It also played into Prime Minister David Cameron’s speech closing the conference, where he attempted to invoke British wartime spirit and emphasised “we’re all in this together”. By announcing policies that impact on the better off, those subsequently announced that impact on the worse off (such as the proposed cap on the amount of benefits that can be claimed) could be defended as being part of this approach. Beyond this, some commentators are also speculating what this means for the other universal benefit systems in place in the UK, such as winter-fuel payments. In a time of economic austerity, the viability of such systems is up for debate.
The impact of the policy announcement for students seems unclear at present. The benefit is paid until age 19 for those in higher education, meaning that by the end of a 3-year degree the benefit will no longer be being paid to any student, regardless of home incomes. Those receiving financial support from home may however find parents having £20.30 less to offer each month. The soon to be announced Browne Report into higher education funding seems poised to pose far more serious implications for those choosing to study at university in the future.