A higher rate tax payer doesn’t make a family affluent- why Ken Clarke is wrong

Finally, the issue I’ve been banging my drum about since October 2010 is lead story on the news. The proposed cuts in child benefit where one parent is a higher rate tax payer show all that is wrong with the government and how broken our systems of taxation, record keeping and common sense actually are.

As I’ve said before, the idea of controlling expenditure is sound but the method of doing it is broken. The tax credit system is broken to the point where it pays out more or less the same as the proposed savings to the child benefit regime will make (£1bn, which is down from of £2bn in 2009) Proposed changes that are so flawed, even news presenters can grasp then when they cross examine ministers.

If the HMRC isn’t capable of working out income by household, then it’s not fit for purpose in the modern age. How broken is it? The Office for National Statistics says the average weekly wage in December 2011 was £465 a week, or £24,180 a year. As we know from the news, from next April if one person in a household earns over £42,475, they will suddenly get no child benefit. I’ve written before I don’t see child benefit as a God given right but I do expect cuts to be done fairly. A lot has been said of the two parent families where both parents work, earn just below the threshold and will still get their child benefit but try looking at it the other way round: a family where one person works and doesn’t earn twice the national average, will get nothing.

All because the IT systems apparently aren’t up to it.

So when I hear the Treasury spinning the cuts in a positive light or Ken Clarke, one of 23 or so multi millionaires in the Cabinet, saying that the affluent have to shoulder their share of the burden it makes me angry. Paying higher rate tax does not necessarily make a family affluent. Especially if only one parent works. Even if both parents work, the cost of childcare can negate a part time salary.

It’s so stupid, I know someone who is barely in the 40% tax bracket who is actually planning to take a weeks unpaid leave. It will cost him £800 in gross salary but since £320 of that goes straight to the tax man, he only sees £480 odd in his pocket. Put that against the £188 he gets every 4 weeks in child benefit, and taking a weeks unpaid leave will actually save him £2,000 in potentially lost benefits. Of course it’s not a long term solution, he can’t exactly ask for a pay rise going forward can he? His wife works part time and they have 3 young children. Hardly an affluent household, like many with either a SAHM or a part time mum with child care costs.

Yet that oily Ken Clarke is on the telly wringing his hands telling us we need to suffer too. Sort out the tax credit system instead you malodorous waste of space:

Last year [2009] more than a million families were overpaid child or working tax credit, and more than £2bn was written off by the government. BBC