Child benefit faces shake-up

Chancellor Gordon Brown was expected to engage in a rare relaxation of traditional ‘Budget purdah’ yesterday by despatching senior officials to the Commons Social Security Committee to explain the technical difficulties of taxing child benefit.

It was seen as a signal that he intends to tax child benefit as if it were received by fathers, though this could be delayed for a year and funded by phasing out the married persons’ allowance or MIRAS.

Brown insisted the committee, which is preparing a report on child benefit, promise to restrict itself to questions on the practicalities.

MPs are expected to oppose the proposition that the highest earner in a household, if paying income tax at the higher rate, is forced to include child benefit in his/her earnings. There are fears that this would embroil the Inland Revenue in issues of cohabitation and paternity that hit the Child Support Agency.

Penalising higher-rate mothers alone would raise #70m, funding an increase of just 10p a week to the benefit. Retaining independent taxation and taxing fathers could raise #450m, adding 70p a week.