The cut to Child Benefit for higher earners was one of the first welfare cuts announced by George Osborne, although it has been one of the last to be implemented. Osborne demanded that families with an earner over £50,000 a year should have Child Benefits reduced and those earning over £60,000 should be stripped of the benefit completely.
In typically bungled fashion the implementation of this cut has turned out to be a bureaucratic shambles. As well as penalising parents who choose to stay at home with children – dual income families could earn a combined wage of just up to £100k a year and not be affected by the cut – the DWP, who administer Child Benefit claims, have no record of how much Child Benefit claimants earn.
This means that these families will still receive the weekly payment, but will now have to register with the self-assessment system to declare the cash to HMRC who will then take the money away from them in their tax bill. Unfortunately HMRC do not necessarily have details of whether tax payers have children, which means if people don’t register then they are unlikely to be discovered.
This is why HMRC chief executive Lin Homer said to BBC Radio 5 Live “We think there is about 200,000 people who need to get off their backsides and do something.”
This is the number of people estimated to have failed to register to pay back Child Benefits on Friday (3rd October), just 24 hour before the deadline.
In truth the situation could be far worse than the tax office is admitting. Those on over £60 grand a year can simply opt out of Child Benefits, as they stand to lose the lot anyway. There has been no estimate so far from HMRC on how many people in this group have failed to do so. Most likely because HMRC don’t know.
Yet this group of benefit fraudsters needn’t worry as they can expect to be treated with kid gloves by the authorities. Whilst there are penalties for those who are caught still claiming when they are no longer entitled, HMRC say that those who don’t bother to register until long after the deadline will probably not be fined. They are unlikely to face ten year prison sentences, or be named and shamed on the DWP website. There have been no posters placed on bus shelters in Chipping Norton encouraging millionaire residents to grass up their neighbours.
If the 200,000 people who have not yet registered fail to do so, then assuming they have on average 2 children, this mass scale benefit fraud could cost over a third of a billion pounds a year. Astonishingly this is more than is lost due to fraud in the main out of work benefits, and around the total amount lost to fraud in the Housing Benefit system. And it could be the tip of the iceberg.
It says everything about the character of the ‘aspirational’ middle classes that along with the rich they may soon become the largest group of benefit fraudsters. Unlike those on out of work benefits, who may do a few hours work and not declare it for a similar sum to child benefits, they don’t need the money. They just want it. And having lots of money, no matter where it comes from, is increasingly seen as the highest form of moral attainment. Which is why there is one set of rules for the rich, and another set of quite different and draconian laws for the poor.
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