Child benefit reforms under fire as parents fail to opt out

http://www.guardian.co.uk/society/2013/jan/05/child-benefit-reforms-opt-out

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Less than a fifth of the 1.1 million families who will lose all their child benefit under reforms coming in on Monday have so far opted out of receiving the payment.

Around 200,000 households have given up their right to child benefit ahead of the changes that critics have warned will cause administrative chaos and exacerbate family breakdown.

Lin Homer, head of HM Revenue and Customs (HMRC), said twice as many families as expected had already opted out of receiving the payment and claimed administration costs were lower than estimated.

But the figure is just a sixth of the 1.6 million families who will be affected by the reforms, of whom 70% (1.1 million) will lose all their child benefit.

The benefit is currently paid at the rate of £20.30 a week for the first child, and then £13.40 a week for each child after that. It lasts until each child reaches 16, or 18 if they are still in full-time education, and in some cases until they are 20.

Under the new system, families where one parent earns between £50,000 and £60,000 will see their benefit progressively reduced based on income, and households where one person earns more than £60,000 will lose the benefit altogether. People who do not give up their entitlement will have to declare it in a self-assessed tax return even if they currently do not file one.

Homer admitted that HMRC had still not contacted 40% of those affected.

Asked if HMRC would pursue families that did not register that they were above the threshold, she said: "We are going to talk to those people and that's what we have been doing since this autumn."

The Treasury said 85% of the population would continue to receive child benefit as they do now while 90% would still receive some of the benefit.

Christian Guy, managing director of the Centre for Social Justice thinktank said the child benefit changes would put more pressure on families. "UK family breakdown is spiralling out of control; the chaotic child benefit reforms being introduced on Monday risk pouring further fuel on the fire.

"The new rules will mean that married couples where one earns over £50,000 pa will be unable to avoid losing some or all of their child benefit. Meanwhile, similar couples who are co-habiting will face unenviable choices: a severe financial penalty if they marry or breaking the law if they deny their relationship status.

"This creates a potential 'marriage penalty', despite evidence showing how crucial marriage is to stable families and children. Research illustrates that breakup rates are three times higher for couples who co-habit compared with those who marry."

Under the reforms, households where one parent earns more than £60,000 a year will have to return the entire amount of child benefit through the self-assessment system, unless they have opted out of receiving it in the first place.

It will be taken away on a sliding scale where mothers or fathers earn between £50,000 and £60,000.

The reform is highly controversial, especially as families where both parents earn just under £50,000 each will keep their full benefits.