Cameron: I'll soften the blow of child benefit cuts for higher earners... PM's vow to tackle unfairness in system

Plans will see it stopped for families where one parent earns over £42,375

But Mr Cameron says he wants to get rid of the 'cliff edge'



U-turn: Prime Minister David Cameron has signalled a climbdown in plans to cut child benefit for families where one parent earns more than £42, 375

David Cameron has signalled there will be a government climbdown over cuts in child benefit for higher rate taxpayers.

The Prime Minister said he would try to tackle the unfairness of the plans which will strip child benefit from any family that has just one person earning over £42,375.

The plans will cost 1.8million families at least £1,000 a year.

The change – due to come into force in April 2013 – has been criticised because couples who both earn just under the threshold will keep the benefit, even if their combined income is substantially more than couples with just one higher rate taxpayer.

Mr Cameron yesterday said he wants to get rid of the ‘cliff edge’ where the benefit drops to nothing as soon as one earner tops £42,375.

The Prime Minister’s intervention is significant with just three months to go before the Budget since it shows he is determined to water down the plans.

However, Treasury sources last night indicated that there is every chance that a change will not be announced in March’s Budget statement even though that risks angering Mr Cameron.

The Chancellor could make the move in his autumn statement this year or in the Budget next year before the changes come into force.

In an interview with Parliament’s House Magazine, the Prime Minister indicated there could be measures to provide transitional relief for those hit by the plans.

He said: ‘Some people say that’s the unfairness of it: that you lose the child benefit if you have a higher rate taxpayer in the family.

‘Two people below the level keep the benefit. So, there’s a threshold, a cliff-edge issue.

‘We always said we would look at the steepness of the curve, we always said we would look at the way it’s implemented and that remains the case, but again I don’t want to impinge on the Chancellor’s Budget.’

Tory MPs are privately urging the Chancellor George Osborne to act in March’s budget in order to spare some families from the pain.

Downing Street aides are concerned that the policy has contributed to a fall in support for the Coalition among women voters.

Child Benefit, which is usually paid to a child’s mother, is worth £20.30 a week for the eldest child, and £13.40 for each subsequent child.

About 7.8million families were paid child benefit in 2009-10 at a cost of just under £12billion.

Cabinet tussle: The Treasury, led by Chancellor George Osborne, is resisting calls from Work and Pensions Secretary Iain Duncan Smith to means test Child Benefit as part of the Government's universal benefit

One way of tackling the ‘cliff edge’ drop would be to gradually reduce child benefit payments over time. Alternatively, the payments could first be taken away from second or third children to reduce costs.

Other ministers want to see parents of truants and rioters stripped of the payments.

The Treasury is resisting a suggestion from Work and Pensions Secretary Iain Duncan Smith that child benefit should be means tested as part of the Government’s universal benefit – a move that would automatically end the penalisation of families with one higher rate taxpayer.

Mr Cameron said he would not abandon the plans altogether since he wants the middle classes to shoulder their share of the burden for paying down the deficit.

The proposals will save £2.5billion a year and the Liberal Democrats have indicated that any changes would have to raise the same amount of money for Treasury coffers.

He said: ‘If we want to make sure that everyone makes a contribution to dealing with the deficit, that’s why we had to look at measures like taking child benefit away from higher-rate taxpayers.

‘If you look at which parts of the country are most affected by the deficit reduction programme, those in the middle are not the most affected.