From the TUC

Rich one minute, middle class the next …

07 Oct 2010, by in Economics

This morning I was leafing through the Guardian when my attention was caught by this article by Deborah Orr and the headline:

Rich people don’t need Child Benefit

It reminded me of this article in last week’s Evening Standard by Chris Blackhurst:

Need a boost for the economy? Cut benefits to the rich

And this one on the Sunday Telegraph blog by Melissa Kite:

Poor little rich kids have no right to benefits

There have been quite a lot of articles like this in recent weeks as it became clearer the government planned some sort of means-test for Child Benefit. Most of them go something like this: the writer was talking to a rich friend the other day; the friend can’t see any point in being given Child Benefit, a Freedom Pass or any other universal benefits; they spend their Child Benefit on champagne (the haute-bourgeois version of keeping coal in their bath-tub); no wonder the country’s running out of money.

And, what do you know, the CBI (in some versions, Reform) has looked into this as well: we could save £10 billion by getting rid of “benefits for the rich.” So the government’s plans to take Child Benefit away from higher rate taxpayers are spot on …

Did you see the switch there? It’s a bit like something from The Real Hustle – there’s a picture in your mind of this rich person (probably smoking a Cuban cigar and driving a Roller) and all we’ve got to do is take away some benefits he doesn’t even need and we’ve saved so much money we won’t have to cut something really useful. In Melissa Kite’s version you can see the hand reaching into the hidden pocket:

I’m trying to feel sorry for all my wealthy middle class friends who are losing thousands of pounds a year in state funded hand-outs, I really am. …

They stand there in their Saville Row suits, with their Hermes ties slightly askew after a night of drowning their sorrows and actually complain without irony about being told they cannot have benefits any more.

Putting “wealthy” and “middle class” next door to each other gives the game away, but usually it’s a bit slicker, and we don’t notice who’d really lose out.

Rich people who won’t be hurt by losing their benefits won’t be typical – they won’t make up even one in a hundred of the people who’d be hit by the government’s plans. Because the money you’d save from excluding people who really can afford to do without universal benefits would be much less than £10 billion – especially if you take into account the fact that it costs a lot more to run a means-tested benefit system than a universal one.

That is why the government is going to take CB away from families with incomes over the higher rate threshold – currently £43,875.  They’re a long way from being poor, of course, but they aren’t ‘rich’ either. And progressives and egalitarians should oppose it.

For one thing, many people with incomes that take them just over that level are already being stretched. Their incomes haven’t gone up as fast as people who really are rich and they need their universal benefits. Maybe not as much as the poor, but they really do need them. Suppose you’re in line for having Child Benefit taken away – that’s the equivalent of a £1,000 a year pay cut. Plenty of people earning over forty-four thousand pounds a year would be devastated by a £1,000 cut in their take-home pay and any union rep. would fight to defend a member facing it.

Secondly, some people live with partners who pay higher rate tax but their own incomes are well below the average. Usually they are women married to men who choose not to share their earnings fairly; for them, Child Benefit is vital and this reform will leave them bereft.

Thirdly, Child Benefit still plays the role that Eleanor Rathbone envisaged nearly a century ago when she began the campaign for family allowances: it represents the value we place on raising the next generation and is a badge of shared citizenship. Allison Pearson had a marvellous article in yesterday’s Telegraph, making this point far better than I can.

And finally, this policy will guarantee that higher rate taxpayers get even less from the welfare state. It’s a fair bet that they will become much less willing to support generous benefits for people further down the income scale.

The answer to the journalists’ friends is simple enough. Their Child Benefit is worth over £1,000 a year. If they think that it’s unfair to society for them to get it, they can pay the money back – go to the local tax office and write a cheque; HMRC will accept it.

I’m probably being a little unfair picking on these three writers. As I say, I’ve seen dozens of similar articles over the last few months. What gets me is that, whenever there’s a proposal for higher taxes on the genuinely rich, suddenly people on eighty or ninety thousand pounds a year describe themselves as “middle class” (when that level of income puts you comfortably in the top 5 per cent).

But when it comes to benefit cuts, just as suddenly, people who earn half that are “the rich”.

Normally I get angry about the way media representations of the poor create reactionary attitudes, but the treatment of people in the middle is starting to be just as worrying.

2 Responses to Rich one minute, middle class the next …

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  2. Dave Jones
    Oct 11th 2010, 12:24 pm

    As usual an excellent analysis. However, those claiming child benefit have to make a conscious act to put in the claim. If the more wealthy don’t feel they need CB they don’t have to claim it in the first place. The same applies to other universal or similar benefits. Those wealthy enough can choose to be fiscally responsible. By the way has anyone done an analysis of the number of people with children who are currently eligible to claim but don’t.