Friday 22 June 2012

Child Benefit: with and without

Some commenters (Sarton Bander, Chef Dave, Onus Probandy spring to mind, UPDATE add Jorge to the list) have often voiced their opposition to the idea of paying out Child Benefit. I'm in favour because I'm strongly pro-family and mildly feminist, plus that's just the way that most countries do things.

But it's no big deal really and it doesn't actually make much difference, it merely affects the timing of payments. In very round figures, let us imagine that we have £200 billion surplus LVT receipts that we have to dish out somehow to 40 million adults and 20 million children as a Citizen's Dividend, and let's assume that a tenth of adults don't (or can't) have children. To simplify things further, let's assume that all adults live in two-adult households.

1. Following SB, CD and OP's approach, 40 million adults would get £5,000 a year each, or £10,000 per household (whether they have children or not), and children get £zilch.

2. If we pay children half the adult rate, then 40 million adults get £4,000 per year each and 20 million children get £2,000 per year each.

3. If a tenth of adults never have children and the other nine-tenths have 2 2/9 children each and those children stay with their parents for half their parents' lives (let's ignore retirement age and upwards), then there will be three types of household:

- Two adults, who never have children = £8,000 a year each.

- Two parents, who have on average 2 2/9 children living with them = £12,444 a year each

- Two adults, who will have children in the future or whose children have left home = £8,000 a year each.

4. Over the lifetime of the household of 40 years (like I said, ignore post-retirement age):

- Childless households will receive £8,000 x 40 years = £320,000.

- Parent households will receive [£8,000 x 20 years] + [£12,444 x 20 years] = £409,000.

5. So let's compare this with option 1. where there is no Child Benefit (or where the Citizen's Dividend doesn't kick in until you are adult):

- Childless households receive £10,000 x 40 = £400,000.

- Parent households receive £10,000 x 40 = £400,000.

6. So yes, childless households might feel a bit miffed, they receive £80,000 less over a lifetime. But parent households end up a princely £9,000 better off.

7. I (personally) don't think that if a parent couple receives £9,000 more over 40 years, that's an average of an extra £2 per parent per week, that this is in any way some sort of big financial incentive to have children, or that it even makes a small dent in the cost of having children (the bulk of which is the loss of mothers' wages), which has been stated to be hundreds of thousands of pounds.

8. It is, as I said, largely a question of timing of payments. Unless I've missed something, we were all children once anyway, and in a sane world, people tend to have children towards the start of their adult lives, so you get a bit more earlier on in life when money is tighter and a bit less later on when it isn't.

8 comments:

Anonymous said...

Why would the citizen's dividend not kick in until you were an adult / why should there be a child rate? I suppose it could be paid in the form of school, health or food vouchers.

Kj said...

There's good reason to cut of CB at 3 kids though, but I belive you've said this before. An economy with CI's, no taxes on income and no defined benefit pensions, will be quite pro-family in itself, even without CB. Even a higher rate CI for pensioners is skimpy, so people would want to invest in human capital, kids.

Mark Wadsworth said...

J, I've added you to the list of nay sayers. And I don't do "should". Any argument based on "should" is invalid.

If I said to you, OK, I hate children as well, let's water down Child Benefit so that instead of a child getting £2,000 a year, they get nothing but the parent gets £2 extra a week, would that cheer you up?

School and health vouchers are in addition to this. "Food vouchers" is very Daily Mail/authoritarian, and completely misses the point.

Kj, agreed on 3 kids. Who said no "defined benefit pensions"? I don't think I've expressed a view on that, have I?

Kj said...

As in not defined by previous income, wrong wording.

Bayard said...

Child benefit as a form of citizen's benefit is completely logical: children are citizens, too. The current form of child benefit, however, is an idea that has become somewhat outdated. AFAIK, the original idea of child benefit was that it was paid to the mother, who was much more likely to spend it on feeding and clothing her children than the father, who was seen as more likely to spend the money down the pub. Also, in the old days, the mother had to go in person to the post office to collect the child benefit, which meant that people who didn't need the money generally didn't bother.

Anonymous said...

I can see other reasons for preferring an adults-only citizen's dividend. Principally, it takes away arguments, debate and admin involved in working out who exactly is responsible for a child, in homes that are not simple two adults with their own children.

Mark Wadsworth said...

B, Child Benefit is paid into whichever bank account the mother enters on one of the forms she gets when she has a baby.

AC, by default, the mother gets it. Which neatly side steps the "mothers versus everybody else" pay gap.

Bayard said...

Mark, yes, I'm aware that is the system now (as a result of some government "efficiency drive", child benefit now costs them far more than it did before, which, I suppose, is par for the course for a gov't efficiency drive). I was talking about the system when child benefit was introduced.