Tories vow to let high earners keep more in child benefits

Child with piggy bank

Parents earning six-figure salaries could be able to keep some or all of their child benefit payments, under proposals put forward by the Conservatives.

The party says that if re-elected on 4 July, it would increase the income threshold at which someone starts to lose their child benefits from £60,000 to £120,000.

It has also re-committed itself to changing the rules so the threshold level takes into account a household's income, rather than an individual's.

The previous system of calculating the threshold based on one earner has been criticised for unfairly penalising single parents and families with one high earner.

The Conservatives say 700,000 families would benefit from the change by an average of £1,500.

Labour said Rishi Sunak was "adding to his list of desperate and unfunded policies that he knows can't be delivered".

Currently someone is eligible for the benefit if they are responsible for raising a child who is under 16, or under 20 but still in education or training.

Parents receive £25.60 per week for one child and £16.95 for each additional child.

The benefit begins to be reduced once one parent earns more than £60,000 and is removed entirely for an income over £80,000 - a deduction called the High Income Child Benefit Charge (HICBC).

This has created a situation where a household with two parents earning £60,000 each get the full amount, while a household where one parent earns just above £60,000 would see their benefit reduced.

In his Budget in April, Chancellor Jeremy Hunt said he wanted to "end that unfairness" and announced a consultation on moving the charge to a household-based system by April 2026.

His party is now recommitting itself to the change - in addition to raising the salary threshold at which the charge kicks in to £120,000. Child benefit payments would be removed entirely from households earning more than £160,000.

Announcing the Conservative's election policy on Thursday, Mr Hunt said: “Raising the next generation is the most important job any of us can do so it’s right that, as part of our clear plan to bring taxes down, we are reducing the burden on working families.

Tom Waters, associate director of the Institute for Fiscal Studies said the change "would mean that only 900,000 families (12% of those with children) would still be losing some or all of their child benefit".

"That does mean that the problems affect fewer people. But at the same time, at that point one has to ask whether it's really worth having the additional administrative apparatus, rather than simply returning child benefit to being universal, as it always was before 2013.

"This would cost around another £1.5bn a year on top of the Conservatives' plan."

The Liberal Democrats said Conservative policies "aren't worth the paper they are written on, after years of hiking taxes on hardworking families".

Responding to the Conservative announcement, the SNP said Westminster parties should "follow the lead of the SNP Scottish Government and introduce the equivalent of the Scottish Child Payment which has lifted 100,000 Scottish children out of poverty".

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The Conservatives say the change would cost £1.3bn in 2029/30 and could be funded from a pot of £6bn per year generated by clamping down on tax avoidance and evasion.

The party is also using the £6bn to pay for part of its National Service scheme costing £1bn, its Triple Lock Plus for pensions costing £2.4bn, and £60m for funding for 30 towns .

Labour has said it would use the same money to fund free school breakfast clubs, and more hospital and dental appointments.

The figure of £6bn a year comes from an interview Gareth Davies, the head of the National Audit Office spending watchdog gave to the Financial Times, in which he set out areas where the government could make savings.

In a statement the watchdog has said: "Eradicating all tax evasion and avoidance outright isn’t possible, but there is more lost tax income that could be collected through tax compliance work.

"Success in recouping revenue will only be possible with prioritisation, backed by sustained focus and further investment.”

Earlier this week, Helen Miller of the Institute for Fiscal Studies told the BBC's More or Less programme: "There is not just a nice anti-evasion/avoidance button you press... you have to do lots of policies and it will be uncertain, and you won't find out for years how much money you are going to get in."