Tax breaks for stay-at-home mothers could be used to help couples disadvantaged by the decision to abolish child benefit for high earners, British prime minister David Cameron suggested today.
Chancellor George Osborne’s announcement that from 2013 taxpayers earning more than £44,000 will no longer receive the benefit has sparked unease among activists and MPs at the Conservative conference in Birmingham.
They fear a backlash from middle-class families angry that the change will hit single-earner households harder than two-income couples, who will potentially be able to keep the benefit while earning more than £80,000.
Mr Cameron this morning defended the change, which will save the Treasury £1 billion a year, but said the Government would take steps to ensure its actions to deal with the deficit are fair “across the piece”.
The prime minister told BBC Breakfast: “We have also got to look at other things we have promised to do. If you look, for instance, at the issue of the stay-at-home mother, we do talk in the coalition agreement about having some sort of transferable tax allowance to help couples in that way.
“So there are things that we will try and do to make sure that all of what we do, if you look across the piece, to deal with the deficit is fair.” It is understood that Mr Cameron - who met wife Samantha and their new baby Florence as they arrived by train in Birmingham this afternoon - claims child benefit worth around £2,500 a year and does not intend to give it up until the rules change.
The PM said he was “sorry” not to have been up-front about the need to cut the benefit in the Conservative manifesto for the May general election, telling ITV News: “In the election campaign, both the Conservatives and the Liberal Democrats said there are going to be cuts, there are going to be difficult cuts and we outlined some of those cuts.
“We did not outline all of those cuts, we did not know exactly the situation we were going to inherit. But yes, I acknowledge this was not in our manifesto.
Of course I’m sorry about that, but I think we need to be clear about why we’re doing what we’re doing.” The Tory manifesto promised to recognise marriage in the tax system by allowing basic-rate taxpayers to transfer unused allowances worth up to £150 a year to their spouses, at an estimated cost of around £550 million.
Mr Cameron’s comments sparked speculation in Birmingham that the break may be extended to cover the wealthier couples who will be affected by the loss of child benefit and that the allowance may be brought forward to 2013. The coalition agreement refers only to legislation within this Parliament - due to end in 2015 - and does not specify exactly which married couples would benefit.
Official sources said “we haven’t closed the door” on the possibility of including higher-rate taxpayers, though it was stressed that no decision has been taken and no discussions have begun with Liberal Democrat coalition allies.
Before the election, deputy prime minister Nick Clegg dismissed the proposal as “patronising drivel”, and the agreement allows Lib Dem MPs to abstain in votes on it.
Labour’s shadow work and pensions secretary Yvette Cooper said the decision to float the idea of tax allowances is a sign that the government’s policy on child benefit is in disarray.
“With each hour that goes by, their child benefit plan unravels further,” she said.
“The idea they will increase support for marriage alongside such big cuts for children shows how unfair and outdated they are. They should be supporting all children, not cutting support and stigmatising some children through no fault of their own.”
Labour said children are bearing the brunt of measures to bring down the £109 billion deficit, despite Mr Cameron’s proclaimed desire to run “the most family-friendly government we’ve ever had”.
Net tax and benefit changes announced so far total £9 billion, of which £6 billion is coming from direct support for children, the party said.
Shadow chief secretary to the treasury Liam Byrne said: “The truth is, while the coalition is punishing families, banks are being handed a multibillion tax cut. This is a coalition that has its priorities horribly wrong.”
Signs of unease were emerging among Tory MPs in Birmingham today.
Senior backbencher David Davis said: “It seems to me not a good idea that one family living next door to another, one with a collective income of £80,000 getting benefit and one with an income of £40,000 next door getting no child benefit.”
Mark Field, Tory MP for Cities of London and Westminster, told BBC Radio 4's World at One he was "right behind" Mr Osborne on welfare reform.
But he added: “That said, obviously as a London MP, the concern is that to earn £44,000, or even £88,000, is not a huge amount of money.
“One of the slight concerns really is that there will be many aspirational people who are probably on £35,000 a year or so who may not necessarily lose their benefit now but think, ‘Well, in a couple of promotions’ time, I could be in that boat’.”
Work and pensions secretary Iain Duncan Smith defended the measure and insisted that the government would not reduce the deficit by “standing on the backs of the poor”.
“This is a decision that is tough, but it is fair and it is right,” he told delegates.
“There is no easy decision as we try to get this deficit down but we will all suffer if we fail and the poorest will suffer the most. This coalition cannot reach out for success by standing on the backs of the poor. We will not do that.”
PA