It is not just the child benefit changes that are upping marginal tax rates for some earners. There is an increasingly bad problem between £100,000 and £118,000 a year, the range of income over which the personal allowance is clawed back. Millions are being dragged into the 40p tax rate as the threshold at which it kicks in is brought down. Welfare reform will help low earners – but Iain Duncan Smith’s new system, if it avoids an IT meltdown, will be imperfect. Many claimants will see their incentives improved but others will lose out, with higher withdrawal rates. The Institute for Fiscal Studies has calculated that 1.6m people – including single individuals who don’t work, and couples where nobody earns – will see their effective marginal tax rate fall, boosting their incentives. But 1.7m others will see their effective tax rate increased. On balance, this remains probably the best possible reform, but it will be accompanied by some highly regrettable collateral damage.