Child benefits disadvantage the poor the most

25 April 2008

The Times, Elizabeth Truss, 25 April 2008

Sir, When Alice Miles accuses universal recognition of children through the tax/benefit system as “robbing the poor” (Comment, April 23), she wrongly conflates two points: recognition of the financial burden of children in the tax system and the inequitable situation faced by the poor.

On the first point, the financial burden of children is recognised for the poor but not the well-off. The less well-off with children benefit considerably compared with the childless poor. However, if you are well-off with children, there is very little difference between the level of tax you pay compared with someone who is well-off and childless.

Miles seems to view the sole role of the tax and benefit system as dispensing largesse based purely on need. However, to remain legitimate tax and benefits have always had to reflect what society values and provide economic incentives for behaviours that bring positive gains. If it is believed that children do benefit society — and it would appear that more young people would be helpful to fund the burgeoning generation of pensioners — then at all income levels there should be some recognition within the tax system of the economic burden having children imposes. After all, the State pays for the schooling of the vast majority of children between the ages of 5 and 16.

On the second point, the UK does have a problem with inequality and low social mobility. To deal with this, the blocks and traps preventing people entering work and moving up the payscale should be removed. Increasing the thresholds at which people start paying tax and higher rate tax would help.

Elizabeth Truss

Deputy Director, Reform

London SW1