Dear Listener

Sorry sorry sorry about last week’s newsletter which didn’t reach you. *Sigh*. Old technology etc etc etc. I hope this one does better. But remember, the latest newsletter is always available on the web  www.bbc.co.uk/moneybox/newsletter. Of course, that reminder is not much use if THIS one bites the silicon dust.

The Daily Telegraph is very excited today about comments made by the Prime Minister which imply the Government will look again at the plans to take child benefit away from families where at least one parent pays higher rate tax. The scheme was announced in the 2010 Spending Review to start in January 2013. It would work like this. If either parent paid higher rate tax then the taxpayer would have extra tax imposed equal to the child benefit claimed by them or their partner. In other words, the child benefit could still be claimed by better off families but 100% of it would then be taken back in extra tax.

It was clearly a daft plan. First, because it would mean a sudden drop in income if someone accepted a pay rise to take them above the higher rate tax threshold of £42,475. Second, because a family with just one breadwinner earning £43,000 would lose it. But a family where both parents earned just below the higher rate limit – for example two earning £84,000 split equally £42,000 each – would keep child benefit. That clearly penalised families where, say, the mother stayed at home or reduced her earnings to look after children.

Now David Cameron has told The House Magazine (the internal weekly for MPs and Peers) “Some people say that’s the unfairness of it, that you lose the child benefit if you have a higher-rate taxpayer in the family. Two people below the level keep the benefit. So, there’s a threshold, a cliff-edge issue. We always said we would look at the way it’s implemented and that remains the case, but I don’t want to impinge on the Chancellor’s budget.”

But decisions already taken indicate that a plan to save rather less is already being considered. The original plans would have saved almost £2.5 billion a year and came with the promise that “the Government will use some of the savings from withdrawing child benefit from families with a higher rate taxpayer to fund significant above indexation increases in the Child Tax Credit.” However, these above inflation increases were scrapped in the recent Autumn Statement. That will save around £1bn a year, and another £275 million will be saved by freezing working tax credit. So half the money that would be saved by taking child benefit away from better off families has already been saved by other means. That leaves the Treasury free to change its plans to reduce the child benefit paid to better off families and save just half the planned amount.

Expect an announcement in the 2012 Budget on 21 March including fairer rules and perhaps a delay until at least April 2013.

***IN MONEY BOX THIS WEEK***

Three of the big six power companies have now announced small and limited cuts in energy prices. Two of the seven smaller ones had already made cuts. The others are likely to follow but why are the cuts so limited – 5% or less typically on just gas OR electricity – when last year’s rises were so large – up to 19% in the autumn alone. We strip the hype and expose the figures.

A well-known payday loan company changes its procedures after taking continuing amounts from the debit card of a borrower’s mother who had simply tried to pay off just one of her son’s debts but found she was liable for his future debts as well. We look at payday loans and how parents can safely help with debt.

The AA charges one customer £243.14 for her breakdown cover if she pays by cheque but says she can have the same cover for £106.36 if she gives them a direct debit authority. This premium of more than £136 to pay by cheque could be a record! We have a call into the AA and we are staying by our phone but we are not expecting a representative to attend at the studio in time for an interview!

Last week we looked at absolute return investment funds most of which gave investors absolutely nothing or less. This week we look at tracker funds which fail in their attempts to track the movements of the FTSE index. Why do they charge so much to fail to do their job?

Plus as a special bonus we might just squeeze in…

…find out what (NB it’s about self-assessment) by tuning in to our packed 24 minutes of prime Radio 4 airtime, Saturday at midday, repeated Sunday at 9pm. Or of course online anytime www.bbc.co.uk/podcasts/series/moneybox - or download the top audio business podcast (ours) through iTunes.

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Maternity and paternity rights is the topic on Money Box Live on Wednesday at 3pm. Call with your question after 1pm on Wednesday 18th on 03700 100 444 or email through the website when the programme page is up later today. Or of course just listen.

Best wishes,

Paul

PS. I will be on Breakfast on BBC One around 0845 on Saturday with a programme trail and back on Breakfast later in the week, probably on Thursday and usually around 0640 and 0820 talking about a money story and answering emails and tweets. But the time, and occasionally the day, can vary.

e-mail Paul Lewis