6 Mar 2012

Child benefit expectations too high for Treasury

From the Treasury point of view, the child benefit story was out of control yesterday, dangerously raising expectations of how much easing of the pain the government can afford.

The Treasury wants to retain the option of doing little or nothing much to change a policy it insists is popular with voters. The first now looks difficult, the second impossible.

David Cameron thinks it might be popular in abstract but the reality of losing a huge chunk of your income when the economy is still flat might well trump that.

One Tory MP told me this morning his party was now closely identified by voters with trying to get rid of the 50p tax rate for people on over £150k but looked like it couldn’t give a fig for those on £43k+ with kids.

Read more: Child benefit changes to be reconsidered says Clegg

Tory MPs with seats outside the South-East say their constituencies are packed with families where the wife often doesn’t have a salary but the husband has just tipped over into the 40p rate (there are 170,000 of them according to the IFS).

“Many would be better off having a pay cut,” one Tory MP said (there are 200,000 dangerously close to the cap according to the IFS).

For a couple of Tory MPs I spoke to this morning raising the cut-off cliff-edge to £50k (one of the ideas floated yesterday and about as far as George Osbornbe is inclined to go) would help … but not get them punching the air. One Tory MP said he thought that might bring down the numbers in a rebellion but he thought there were 40 Tory MPs who’d vote against the CB changes.

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