Jeremy Hunt has said he accepts there is an “unfairness” in the child benefits system, after being quizzed ahead of his spring Budget in March.
Money Saving Expert Martin Lewis questioned the chancellor over the much-criticised high-income child benefit tax charge during an interview on his programme on Tuesday evening. Introduced in 2013, it applies to anyone with an income over £50,000 who gets Child Benefit, or whose partner gets it. However, a couple each earning £49,000 avoids the charge altogether.
Chancellor Jeremy Hunt was challenged on ‘unfair’ child benefits system— (ITV)
Describing it as “the most unfair structure possible”, Mr Lewis said the issue was “by a mile the biggest question asked” by his viewers, and accounted for a third of all queries that were directed to the chancellor before the programme. An increasing number of people have been hit by the charge, the presenter said, as the threshold has stayed the same since it was introduced.
Mr Hunt acknowledged that the charge disproportionately affects dual-income families, adding that it was “one of the many distortions in our complicated tax system”.
“I fully accept there is an unfairness with what happens with dual-income families,” Mr Hunt said: “All I will say is this is one of many distortions in our overcomplicated tax system that I look at when it comes to every budget. There are lots of things I’d like to change. If it’s affordable to do so, then I will do so, but it’s too early for me to know at this stage.”
Jeremy Hunt is due to deliver his spring budget in March— (PA Wire)
Speaking after the interview, however, Mr Lewis said he thought there was only a ‘40% chance’ the issue would be addressed in the Budget.
Elsewhere in their conversation, the chancellor said he “did not understand” recent comments by NatWest Group chairman Sir Howard Davies, who suggested it was not that difficult to get on the property ladder.
Joining criticism of Sir Howard, the Chancellor said: “I just don’t really understand how he could have said that. “When I am looking at the pain that families are going through because they’ve seen interest rates go up to five and a quarter per cent, mortgage rates go up by considerably more than that if they have to change it.
“So, I think people are finding it very difficult and we are seeing that in the volume of house transactions that are happening.”
After his original interview aired on BBC Radio 4’s Today programme, Sir Howard backtracked and insisted he “did not intend to underplay the serious challenges” people face buying homes.
Martin Lewis challenged the chancellor on his ITV show— (Martin Lewis Money Show/ITV)
During the interview, the Chancellor stressed that taxes will not return to pre-pandemic levels in “one go”, but signalled he would like to cut taxes further, but only when it is “affordable and responsible”.
He said: “After a period in which taxes have gone up in order to pay for the costs of the pandemic or the £3,500 of help we gave people in the cost of living crisis to a typical family, we now want to bring that tax burden back down.
“Now we can’t get all the way back to where we were pre-pandemic in one go, but we can make a start. And this is about £1,000, just under £1,000 for a typical two earner family. But we would like to go further as and when it’s affordable and responsible to do so.”
The interview comes after a shadow minister wrote to the Treasury’s top mandarin to raise concerns that the department has been issuing misleading claims on tax.
As announced in the autumn statement in November, the main rate of national insurance was reduced by two percentage points, from 12% to 10%, on January 6. Mr Hunt said the decision meant families with two earners are nearly £1,000 better off a year.
However, Labour had said it amounted to a “raw deal” as Mr Hunt has kept tax thresholds frozen, a fiscal policy first introduced by Mr Sunak when he was chancellor during the coronavirus pandemic. The frozen thresholds would mean a de facto tax rise to millions as their wages increase with inflation while tax bands remain static.
