Child Benefit and Guardian's Allowance: Where it all started

Child benefit was phased in from 1977 to 1979 by Labour, replacing family allowances and child tax allowances.

Child tax allowances

Child tax allowances were first introduced in 1798, though they were abolished again in 1805. They were reintroduced in 1909.

The amounts related to the age of the child. They were limited to taxpayers (working people) and were worth even more to higher rate taxpayers.

Family allowances

Family allowances were the subject of a White Paper in 1942, but there was disagreement among Labour and Conservative politicians about the way they should be implemented.

The Beveridge Report, written by the civil servant William Beveridge, proposed an allowance of eight shillings per week for all children, which graduated according to age. It was to be non-contributory and funded by general taxation. After some debate, the Family Allowances Bill was enacted in June 1945. The act provided for a flat rate payment funded directly from taxation. The recommended eight shillings a week was reduced to five shillings, and family allowance became a subsidy, rather than a subsistence payment as Beveridge had envisaged. You can find further details on the Beveridge Report on the national archives website.

Family allowances were introduced in 1946, with the first payments being made on 6 August. At that time, they were only paid for the second child onwards, a further watering down of Beveridge’s scheme. In 1952, the Conservative government reduced food subsidy, which had been in place since the war. From October 1952, family allowance was increased by three shillings per week in order to advance the potential effect on nutrition. As a means of encouraging families to keep children in education, the Family Allowances Act of 1956 extended the family allowance to all school children, although the bread subsidy was abolished. In 1961, Cabinet agreed that the majority of apprentices be excluded from the family allowance provisions, but dismissed proposals that family allowance for the second child be abolished. Family allowance provisions therefore remained intact in the Family Allowances and National Insurance Act of 1962.

Believing family allowance was not widely supported among its constituency, the Labour government of 1964 was unenthusiastic about the issue. However, in 1966, pressure groups (especially the Child Poverty Action Group) forced it to address family allowance. Cabinet debated the respective merits of an increase in the existing family allowance, or a new means-tested family supplement that was supported by the Chancellor, James Callaghan.

Following the Conservative electoral victory in 1970, Sir Keith Joseph introduced Family Income Supplement (FIS). It was designed to replace further increases in family allowance with a means-tested supplement for the poorest families, and was in some ways similar to the scheme devised by Callaghan under Labour. There was a low take-up rate of FIS, which proved unpopular, especially as it was accompanied by the withdrawal of subsidised milk for children.

Child benefit

Back in power, Labour had originally intended to merge family allowances and child tax allowances in the new benefit called child benefit in the mid 1970s, but under financial pressure decided to abandon these plans. Child Poverty Action Group (CPAG) was instrumental in ‘changing their minds’ and in 1975 the child benefit bill was enacted. The bill replaced family allowance with a benefit for each child, which was paid to the mothers. The act was not implemented immediately because of the economic crisis of the mid-1970s. Eventually, child benefit was phased in from 1977 to 1979.

In 1984, there was a major social security review, announced by the Conservative government and leading to a Social Security Act in 1986, with a new system being introduced in 1988. Many supporters of child benefit believed that it might be abolished, means-tested, or taxed. CPAG was the catalyst behind the formation in 1985 of Save Child Benefit, a grouping of originally about sixty organisations, ranging from women’s organisations to trades unions and from churches to children’s charities. In the event, as a result of campaigns by Save Child Benefit and others, child benefit was retained.

Many proposals were put forward to restructure, reduce or radically change child benefit. But in 1990 the Prime Minister, John Major, declared that child benefit ‘is and will remain a strong element in our policies for family support’. He restructured child benefit, to introduce a higher rate for the first or eldest eligible child.

In July 1998, the Labour government abolished one parent benefit (the addition to child benefit for lone parents, originally introduced in 1976). They did this by incorporating one parent benefit into the main child benefit rates. It was abolished for new claimants and existing claims were frozen. Between April 1997 and April 2003, the rate of child benefit for the first child increased by 25.3 per cent and the rate for subsequent children by 3.1 per cent in real terms. Most of this increase took place in 1999 for the first/eldest eligible child and coincided with the administration of child benefit moving from Social Security to the Inland Revenue, which has now become HM Revenue and Customs (HMRC).

In 2004, the Government introduced new immigration rules, which now mean that someone has to have a ‘right to reside’ in the UK in order to be able to claim child benefit, therefore excluding many migrants from entitlement.

Under the Child Benefit Act 2005, child benefit is now available for young people completing a course which they started before their nineteenth birthday (up to age 20). Those in specific unwaged training programmes are also eligible. These reforms rectified long-standing anomalies.

Recouping child benefit from higher rate taxpayers

Neither the Conservative nor the Liberal Democrat General Election manifestos mentioned Child Benefit. However, in his speech to the Conservative Party conference on 6 October 2009, the then Shadow Chancellor, George Osborne, had said:

We will preserve child benefit, winter fuel payments and free TV licenses. They are valued by millions.

In his Budget speech on 22 June 2010, the Chancellor said that the Government had had to take a “difficult decision” about child benefit:

I have received many proposals about this benefit. Some have suggested that we means-test it; others that we tax it. All these proposals involve issues of fairness.

The benefit is usually claimed by the mother. To tax it would mean that working mothers received less than the non-working partner of higher earners. To means-test it, we would have to create a massively complex new system to assess household incomes. I do not propose to do those things. I know that many working people feel that their child benefit is the one thing that they get without asking from the state. So instead, to control costs, we have decided to freeze child benefit for the next three years. This is a tough decision, but I believe that it strikes the right balance between keeping intact this popular universal benefit, while ensuring that everyone across the income scale makes a contribution to helping our country reduce its debts.

In his speech to the Conservative Party conference on 4 October, Mr Osborne announced that child benefit would also be withdrawn from higher rate taxpayers:

We still pay over a billion pounds a year in child benefit to higher rate taxpayers. Believe me, I understand that most higher rate taxpayers are not the super-rich. But a system that taxes working people at high rates only to give it back in child benefit is very difficult to justify at a time like this.

And it's very difficult to justify taxing people on low incomes to pay for the child benefit of those earning so much more than them. These days we've really got to focus the resources where they are most needed. We've got to be tough but fair. That's why we will withdraw child benefit from households with a higher rate taxpayer.

Child benefit would continue to be paid for all children, but would be clawed back from families containing a higher rate taxpayer from 2013. HMRC would implement the policy “through the existing PAYE and Self-Assessment structure.

The announcement provoked strong reactions in certain sections of the media. Particular attention was focused on the perceived anomaly whereby single earner couples earning just over the higher rate tax threshold would have their child benefit clawed back, while dual earner couples each earning just below the threshold would keep the full amount.

The Spending Review published on 20 October 2010 confirmed that child benefit would be withdrawn from families with at least one adult paying higher rate income tax, from January 2013.

The Spending Review estimates that the clawback of child benefit from higher rate taxpayers will yield savings of £2.5 billion a year by 2014-15 – considerably more than the previously announced figure of £1 billion. The latest estimate takes into account losses due to “possible tax planning” and “non-compliance”, estimated at £280 million a year and £60 million respectively for the first full year (2013-14).

Last reviewed/updated 2 August 2021