The government is once again going to save hundreds of millions of pounds in future pensions bills by keeping young mothers and caring grandparents ignorant of the consequences of a law change that came into force when George Osborne was Chancellor of the Exchequer.
For once the Department of Works and Pensions is not behind these savings. Instead it is HM Treasury via HM Revenue and Customs. And the way the government is getting away with this would not be obvious to anyone unless they had an encyclopedic knowledge of social security regulations.
When a young mother is giving birth to a new born probably the last thing on her mind is whether she will get a decent pension. Yet laws introduced in 2013 which reformed and effectively ended child benefit as a universal benefit have had an extraordinary hidden knock on effect on individual pensions that will be paid out in 40 to 50 years time. It also hit home much earlier for caring grandparents who took on child care responsibilities – the very group of 50s women who have already lost tens of thousands of pounds by the raising of the pension age from 60 to 66.
The law change introduced by George Osborne after his 2012 budget was to stop paying child benefit to people whose individual income exceeded £50,000-£59,000. Those who were already receiving child benefit and didn’t know about the change or didn’t tell the Inland Revenue were hit with stiff fines.
As a result mothers who were aware of this widely advertised change didn’t put in a claim. What they didn’t realise is without a claim for a benefit that would be denied – they would also lose their national insurance credits while they brought up a young family. This can make a huge difference to the amount of state pension they can claim decades later.
There was a double whammy in all this which hits home much sooner. Grandparents and other close relatives who were happy to help with childcare for a struggling young family are entitled to additional credits on their final pension called Specified Adult Childcare Credits. But if their daughters haven’t registered for child benefit they get nothing.
Both groups get nothing
If either group suddenly finds this out all they are entitled to is just three months national insurance credits- even if it is years in arrears.
Now if you think this all sounds rather fanciful all this information is taken from a bundle of documents prepared for an appeal to a tribunal to take place next year. The case is being bought by grandparent Judy Lynch from Harrow in north London, a woman born in the 1950s who has already lost £40,000 in back pension by the raising of the pension age from 60 to 66 and stands to lose another £800 a year from this law change. Her NI credits were five years short of getting a full pension. Her case was highlighted in The Times by journalist David Byers recently.
She has written to the tribunal to tell them her daughter did not claim child benefit in 2016 precisely because she knew she would not get it. But the form contains no information that she would lose national insurance credits towards her pension nor has she ever received a letter telling her the consequences of her decision. Nor is it made clear that if grandparents helped her with the childcare that they would not be able to claim additional national insurance credits.
George Osborne has managed to get away with this for at least six years before MPs in a Westminster Hall debate in the Commons caught up with it. When they did the then financial secretary of the Treasury came in for strong criticism from all parties including a Tory backbencher, Craig Mackinley. He attacked the system.
He said: “There is no withdrawal of child benefit for a couple both earning £50,000—the high income child benefit tax charge does not apply, even though the family income is a generous £100,000. In another family, in which only one parent is working and earning, say, £60,000, and the other is not working, there would be a full claw-back of the child benefit given.”
The severest critic was Alison Thewliss, SNP MP for Glasgow Central : “Organisations such as the Women’s Budget Group have long argued that the UK Government’s approach to balancing the books is gendered and does not stand up to the most rudimental scrutiny from an equality perspective. This policy is a key example of that. Budgets and spending reviews come and go, but we are yet to see any real strategic direction in tackling gender inequality.”
“The notion that a woman has to know her partner’s intimate financial details is quite unusual. My husband and I have separate bank accounts. I have no idea what he earns, but I was expected to phone up and give intimate details to someone over the phone. That will be all the more difficult for a woman in a situation of financial coercive control, and it will give the male parent a huge amount of control.”
Anneliese Dodds, then Labour’s shadow Treasury spokesperson said:” New research on the high-income child benefit charge indicates that much larger numbers of people are being drawn into the system than were initially. The Institute for Fiscal Studies indicated that since the £50,000 threshold has not shifted upwards, about 36% more people— 370,000 more families— will lose child benefit in 2019-20 than in 2013-14.”
The government of course denied that it was targeting women again.
Jesse Norman said: “The hon. Member for Glasgow Central said that the charge is a gendered policy. I do not think that is true at all, and many other aspects of Government policy do not reflect anything like that position, as she will be aware. For example, there is extensive work in supporting women as entrepreneurs and women in business.”
More recently, Liz Truss, who is also women’s and equalities minster, has backed this up claiming that women affected have plenty of time to make up lost national insurance credits to get a full pension.
There is one other twist to this story. The government has part privatised the handing out of child benefit forms to a private company, Bounty Joy Ltd. This firm gives out vouchers to women in maternity wards and child benefit claim forms. The firm has one director Alan Chan, a Canadian resident in the United States. He has a correspondence address in Stevenage, Hertfordshire and employs 19 people to cover England. The company has yet to produce a single account. I think this may have to be the subject of another investigation.
In the meantime lots of people are having to put up with yet another sleight of hand by Conservative ministers so they can hide savings. Again women are the main losers. And George Osborne has form on this. After all it was he who boasted in 2013 at a global finance conference talking about the raising of the pension age :“I’ve found it one of the less controversial things we’ve done and probably saved more money than anything else we’ve done.”
Gareth Thomas Labour MP for Harrow West and her local MP, who has already written to HMRC and the DWP about this and now intends to raise the issue again in Parliament. He described the revelations about the arrangements as ” scandalous” for both young mothers and grandmothers also condemning the privatisation of benefit advice to young mothers when they are ” at their most vulnerable.”
He attacked the government’s decision not to disclose to people that could lose national insurance credits by not applying for child benefit in the forms available at hospitals and is to press ministers to change the policy on this and the system which means mothers and grandmothers can’t get back most of the credits if they later find out.
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