Why we should be demanding even more benefit cuts

Rather than complain about the withdrawal of our child benefit, we ought to be encouraging it. Merryn Somerset Webb explains why.

Here is something for high earners to think about when they are whining about the loss of their child benefit payments: over the last decade they haven't gained at all from the rise in benefits. Sure, middle and high earners have been getting a big pile of cash in government hand-outs a total of £41bn. But guess what? They are paying much the same amount in extra taxes.

According to research from Reform, middle earners (defined as families on more than £25,000) were getting £15bn more in welfare in 2009 than they were in 1999 and an extra £27bn in "benefits in kind." But any "apparent gain" was just an illusion: they were also paying an extra £35bn in direct taxes and £6bn in indirect taxes (VAT and so on).

Given this miserable state of affairs, surely instead of complaining about cuts to universal benefits we should be happily accepting them, even demanding more of them. We should - as I have said before - start by abolishing child benefit for everyone and then compensating the very poor via the already sprawling welfare system. Then we should be lobbying (hard) for future taxes to fall too.

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That will take us back to square one of course. But isn't it better to not be taxed than to be taxed and then compensated for being taxed? Governments tend to be keen on high and universal benefits for the simple reason that they make huge numbers of people feel partially dependent on the state (which is good if you want to stay in power) and because it makes those who would normally criticize unaffordable payouts more likely not to do so (also good for staying in power). Only seven days to go until we find out what George Osborne really thinks about it all.

Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.