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Chancellor Jeremy Hunt admits Child Benefit is unfair, as Martin Lewis grills him and asks for it to be fixed

The Chancellor Jeremy Hunt has admitted that there is an "unfairness" in the current Child Benefit system, which means some families get less (or no) support as a result of "overcomplicated" tax rules. Mr Hunt made the comments during a grilling from MoneySavingExpert.com founder Martin Lewis.

In the interview, which aired during the ITV's The Martin Lewis Money Show Live Tue 9 Jan (at 23min 59s in), Martin explained that around a third of all the thousands of questions he had received from viewers to put to the Chancellor had been about the "grossly unfair" Child Benefit rule, which requires anyone earning over £50,000 and claiming the benefit to pay some of it back.

It's known as the 'high income Child Benefit tax charge' and means that a couple could earn a combined income of £100,000 a year and get full child benefit, while a single parent family earning £60,000 a year wouldn't get any, nor would a two parent family with one earner getting £60,000 and over. 

Child Benefit is a monthly payment, worth at least £1,200 annually, for anyone with parental responsibilities for children under the age of 16 (or up to 20 in full-time education). For full information on how it works, see our Child Benefit guide.  

Martin Lewis: 'The current Child Benefit system is the most unfair structure possible'

Martin put to the Chancellor that many people, including him, thought the current system was the "most unfair structure possible" as it hits many people and families with a single income. 

Mr Hunt admitted that there was a "very big distortion" in the marginal rate of tax via the high income charge and said there was an "unfairness in what happens with dual-income families on £50,000 each compared to a single earner on £100,000".

He added: "All I will say is this is one of many distortions in our overcomplicated tax system that I look at when it comes to every Budget. There are lots of things I'd like to change. If it's affordable to do so then I would do so. But it's too early for me to know at this stage whether that's going to be the case this time."

In response, Martin told Mr Hunt that the Child Benefit issue was the "biggest single question" received from viewers – which the Chancellor said he had "noted".

What Martin Lewis and Jeremy Hunt said – the full transcript...

Martin Lewis: "I want to move on to what was by a mile (the most popular question) and it's important you understand this, you've got an election coming.

"So by a mile, the biggest question that we got, which was about a third of all the questions, is on Child Benefit.

"And I think the best example is Alan's: 'My son's partner tragically died 34 days after giving birth to twins. He's taken a new job that now pays him £60,000 and is struggling with the cost of living and mortgage repayments – and the loss of a second income.

"'HMRC has asked him to repay the Child Benefit when he needs every penny. It seems grossly unfair that a couple can bring in nearly £100,000 – because it's about the individual income – but a single breadwinner loses out once they earn over half of this.'

"So many people, me included, think this is the most unfair structure possible – to hit people who are on a single income, when you have couple who can earn so much more (and aren't affected). Isn't it that time you fix that one?"

Jeremy Hunt: "Well, let me explain what happens there and I think some of this you'll understand, but for the benefit of your viewers... Child Benefit is targeted at people who are earning less than £50,000 a year and I think it is right that you target the benefit system to help people on the lowest incomes.

"(This issue) affects about 12% of people..."

Martin: "Well more, it's been frozen since 2013, which means hundreds of thousands more people are affected by it."

Mr Hunt:
"Well, we look at those thresholds every year in Budgets, and we will continue to do that. But it's about 12%.

"What we've done to try and avoid those charges that you talked about is, we've made it possible for people who are earning above £50,000 to pay it through their tax code. So they don't get a sudden charge.

"We've also made it possible for people to claim the National Insurance credits retrospectively, but let me just, I want to answer your question.

"There is nonetheless a very big distortion in the marginal rate of tax – and I fully accept there is an unfairness in what happens with dual-income families on £50,000 each compared to a single earner on £100,000."

Martin: "Or a couple where one earns £51,000 and the other person doesn't – they have the same issue."

Mr Hunt: "All I will say is this is one of many distortions in our overcomplicated tax system that I look at when it comes to every Budget. There are lots of things I'd like to change. If it's affordable to do so then I would do so. But it's too early for me to know at this stage whether that's going to be the case this time."

Martin: "Okay. Well, (it was the) biggest single question we got from all of our viewers, so..."

Mr Hunt: "Noted."

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