Dear Listener

It was Iain Duncan Smith, not George Osborne, who announced the end of Child Benefit this month. On 6 October he told people at a Conservative Party conference fringe meeting that they shouldn’t worry about the anomalies in George Osborne’s plans to tax it away in 2013 from households where at least one partner pays higher rate tax. They would be solved, he said, in 2017 when child benefit would be absorbed into his Universal Credit which “brings together all this stuff and we’ll be able….to rectify and ameliorate some of these points.” 

He probably didn’t realise that he announced the end of Child Benefit on the 100th anniversary of the birth of the woman who introduced it. Barbara Castle, born 6 October 1910, was a pensioner herself by the time she fought her male colleagues in the Callaghan government to extend family allowance to the first child in every family and pay for it by taking over child tax relief – which gave most to the best off. She told Parliament why.

“It achieves a long overdue merger between child tax allowances and family allowances into a new universal, non-means tested, tax-free cash benefit for all children, including the first, payable to the mother…What will the child benefit scheme achieve? First, and most important, the poorer families who have not been able to take advantage of child tax allowance in full, if at all, because of their low incomes, will in future do so, as the new benefit extends the cash advantage of the allowance to all these families. Those who are dependent on means-tested benefits will receive a larger part of their income from benefits as of right. Secondly, child benefit will be paid for every single child in the family, thus extending the benefit of a payment to the first child in 4 million families drawing family allowance as well as to the 3 million single-child families, thus doubling the number of children receiving benefit. Thirdly, once the scheme is operating, we shall have for the  first time a single universal system of family support.” (Hansard 13 May 1975 col 330, 334).

The advantage of that universal system, campaigners still say, was that the money is paid to the mother in work or out, as relationships formed or ended, and regardless of pay rises or falls. It would become the one constant in the financial lives of millions of mothers.

Child Benefit, introduced in April 1977 (and a year earlier for one parent families after heavy lobbying by pressure groups) was the first universal cash benefit. But now it is to be taken away from the fairly well off (earning around 175% of the median full time wage). And in 2017, forty years after it began, it will be turned into one of those means-tested benefits which Barbara Castle wanted to  begin to replace.

Read the whole 35-year-old debate here http://hansard.millbanksystems.com/commons/1975/may/13/child-benefit-bill#column_330

***IN MONEY BOX THIS WEEK***

As we exclusively revealed last week the quango cull will see the end of Consumer Focus, Consumer Direct and the consumer functions of the Office of Fair Trading. In future we will have to call Which?, Citizen’s Advice, or our local trading standards office. More on the implications this week.

Pay Day Loans are an American idea – but without the tough regulation that applies in much of the USA. The idea is this. If you run out of money during the month a pay day loan will tide you over to the next pay day at which point it has to be repaid. The flaw is of course you will probably run out again next month. And the one after. And although the cash cost of the loan – typically £25 for each £100 borrowed – seems affordable the APRs can hit the millions of per cent if you borrow for a week.

The very well paid will be stopped from salting away more than £50,000 a year tax free in their pension pot. And it could mean a sudden tax bill for some people in final salary pension schemes who get a promotion. It will save the Treasury an estimated £4 billion a year.

We look at the prepaid MasterCard card that can be hard to prepay and expensive to use. So why is the Student Travel Agency selling them to gap year students?

And maybe a mention of a new ruling on Payment Protection Insurance. The Competition Commission (which isn’t being quango’d) has confirmed that it will ban lenders from selling PPI when the loan is sold. Details and implementation date to be announced but it will probably not be until October 2011. So even if we don’t get round to it you know what’s going to happen.

As ever we will run out of time before we run out of stories but we will squeeze what we can in before the Controller radio 4 shouts ‘Time’. Find out what we manage by tuning in just after noon on Saturday. Or hear the repeat at nine pm on Sunday. Or log on and listen anytime on our website www.bbc.co.uk/moneybox. There you can also read web pieces, download transcripts, follow links, and send us stories or ideas you want us to look into and Have Your Say on pay day loans.

Best wishes,

Paul

PS don’t forget the programme trail on Breakfast on BBC 1 between 0845 and 0900 on Saturday.

e-mail Paul Lewis