Child Benefit Reform

New government policy states that child benefit will no longer be paid to families in which one or more members is a higher rate income tax payer. This is scheduled to start in January 2013. Child benefit is a tax free payment to people who look after children (normally to their parents).1 At present, it is a universal benefit that provides £20.30 a week for the eldest child and £13.40 a week for each other child. It is paid for all children under 16, and some children between 16 and 20 in approved training. Around 7.8 million families received child benefit in 2009/10, covering 13.6 million children.2 Estimates on the number of families who will lose the benefit vary between 1.5 and 1.8 million.3

Evidence of the possible benefits

This is expected to reduce government spending by around £2.5 billion per year by 2015.4 This could lead to a reduced individual tax burden in the future, with potential beneficial effects on individual wealth and, therefore, health.

Evidence of the possible risks

There is evidence of an association between increasing income and better health in adults 5-8. There is a range of evidence suggesting associations between child health and family income. Studies in the US 9 and Australia 10 using data from large national surveys have linked improving child health status with improved family income. The reasons for this link are not clear, but suggested routes include worse management of chronic conditions in childhood in poorer families and an effect mediated by parental health.

Studies linking family income with child health in the UK are less clear. One study, looking at a range of childhood health measures suggests family income is not a major determinant of child health in England.11 Other studies found household income has a weak or absent direct effect on child cognitive and behavioural development12 and a weak effect on improving child respiratory health.13

Any implications for health & well-being

The policy change will lead to reduced family income for families with relatively high incomes. Better health is associated with higher incomes. The health gains associated with income are on a gradient, so even though those losing income as a result of this change are relatively wealthy, there may still be an effect to reduce the health status of the adults in these families. The effect of family income on the health status of the child is less clear.

This policy also poses a risk to equity. It is possible for families with two earners just below the means testing threshold to still receive the benefit, despite having a larger income than families with a single earner just above the threshold.

Author: Felix Greaves BM BCh, Public Health Registrar, Imperial College London

UK area affected: UK-wide

References
1.         What is Child Benefit?  London: HM Revenue and Customs; 2011; Available from: http://www.hmrc.gov.uk/childbenefit/start/who-qualifies/what-is-childbenefit.htm.
2.         Child Benefit Geographical Statistics.  London: HM Revenue and Customs; 2011; Available from: http://www.hmrc.gov.uk/stats/child_benefit/geographical.htm.
3.         Child Benefit for higher rate taxpayers.  London: House of Commons Library; 2010; Available from: http://www.parliament.uk/briefingpapers/commons/lib/research/briefings/SNSP-05732.pdf.
4.         Spending Review 2010 policy costings.  London: HM Treasury; 2010; Available from: http://www.hm-treasury.gov.uk/spend_sr2010_policycostings.htm.
5.         van Doorslaer E, Gerdtham U-G. Does inequality in self-assessed health predict inequality in survival by income? Evidence from Swedish data. Social Science & Medicine. 2003;57[9]:1621-9.
6.         Smith JP. Healthy Bodies and Thick Wallets: The Dual Relation between Health and Economic Status. Journal of Economic Perspectives. 1999;13[2]:145-66.
7.         Marmot M. Fair Society, Healthy Lives: A Strategic Review of Health Inequalities in England Post-2010. London2010.
8.         Kawachi I. Income inequality and  health’ In: Berkman L, Kawachi I, editors. Social epidemiology Oxford. Oxford: Oxford Univeristy Press; 2000. p. 76-94.
9.         Case A, Lubotsky D, Paxson C. Economic Status and Health in Childhood: The Origins of the Gradient. American Economic Review. 2002;92[5]:1308-34.
10.       Khanam R, Nghiem HS, Connelly LB. Child health and the income gradient: Evidence from Australia. Journal of Health Economics. 2009;28[4]:805-17.
11.       Currie A, Shields MA, Price SW. The child health/family income gradient: Evidence from England. Journal of Health Economics. 2007;26[2]:213-32.
12.       Violato M, Petrou S, Gray R, Redshaw M. Family income and child cognitive and behavioural development in the United Kingdom: does money matter? Health Economics. 2010: [epub ahead of print]
13.       Violato M, Petrou S, Gray R. The relationship between household income and childhood respiratory health in the United Kingdom. Social Science & Medicine. 2009;69[6]:955-63.