After a Tory backlash controversial plans to cut child benefit for the better off are being watered down.
The Chancellor George Osborne plan was to remove child benefit from any household where one person earned enough to pay the higher tax rate. However he is now making way to change this.
Nick Clegg confirmed this morning that the government is looking again at the child benefits cuts due to the 'unintended consequences' of the plans at the moment.
Nick Clegg the Deputy Prime Minister said the Government believed it was right to ensure that those on the highest incomes bear their share of the burden of deficit reduction.
Nick Clegg told Sky News: 'We've also equally accepted that there's an issue about how you do that, so you make sure you don't create these unintended consequences where, say, a family with one upper-income earner get child benefit removed when there's another family with two income earners who collectively earn more but keep the benefits.'
The original figure which was just over £40,000 now looks as though it will be raised as high as £80,000 nearly double what was first indicated.
The change is due to come into force at the beginning of next year, however it emerged yesterday that the Chancellor had different options for softening the impact of the change.
His options included raising income to £50,000, higher rate tax payers only receiving half the amount of child benefit or making payments only to families where the children are under the age of five.
However in a Statement issued last night by the Treasury they made no reference to higher rate taxpayers, they instead focused on those earning more than £80,000.
A spokesperson for the treasury said: ‘It is not fair to ask someone earning £20,000 to pay for the child benefit that goes to someone earning £80,000 or £100,000.’
Critics say the current proposal will unfairly penalise families where the mother stays at home and Tory MPs are putting pressure on Mr Osborne to abandon his current proposals.
The current plan is that all families in which one parent earns more than the 40 per cent tax threshold which is currently £42,475 a year will lose all child benefit.
This would mean a couple with two children could lose more than £1,750 a year. However provided neither partner pays the higher rate of tax a couple who between them earn £80,000 would still receive full child benefit.
Critics last night said the options being considered did not go far enough.
Mark Reckless Tory MP said: ‘None of these proposals addresses the unfairness of single-earner couples with a stay at home parent losing their child benefit while two-earner households with much larger incomes keep theirs.’
The original plan was unveiled by Mr Osborne at the Conservative Party conference in October 2010.
David Cameron said in January: ‘We always said we would look at the way it’s implemented and that remains the case.’ This gave the first glimpse of a possible re think.
However with the £1 billion planned saving the treasury has warned that softening the blow will wipe out most of the savings.
‘If you are a two-earner family on £84,000 you keep it, but if you are a one-earner family with three kids on £42,000 you lose £2,500 – where is the fairness in that?’
Ed Balls, Shadow Chancellor
Today Shadow Chancellor Ed Balls will force a symbolic Commons vote on the issue thus adding to the pressure.
Yesterday Mr Balls told Sky News: ‘If you are a two-earner family on £84,000 you keep it, but if you are a one-earner family with three kids on £42,000 you lose £2,500 – where is the fairness in that?’
Labour will also attack plans to cut working tax credit on thousands of part time or low income families.
Under new proposal, which are to be introduced next month couples who qualify for tax credits will have to work a minimum of 24 hours instead of the current 16 hours.
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