Wealthy grandparents could exclude households from child benefit

The child benefit reforms have come under criticism

The child benefit reforms have come under criticism

The upcoming child benefit reforms, which will see higher taxpaying households stripped of their payments, may mean mothers could lose benefits if a wealthy grandparent moves into the family home.

The changes, set to take effect from 2013, would exclude households with at least one higher rate taxpayer from receiving payments.

During a debate in the House of Lords, a Labour suggestion that high earning grandparents would fall under the new rules was not ruled out by the Treasury minister.

Labour Treasury spokesman Lord Eatwell reminded peers that the universal benefit had been introduced as a way of giving cash directly to the mother. Since its beginnings in the 1970s, the child benefit scheme has traditionally held the father’s tax status to be irrelevant.

Lord Eatwell presented a hypothetical scenario in which a grandmother who is a higher-rate taxpayer moves in with her daughter, a child benefit recipient. He asked: “Will the grandmother be fined if she doesn’t tell her daughter that she is a higher-rate taxpayer? Or will the family lose its child benefit?” He continued: “I don’t think that’s very family-friendly.”

The reforms were also criticised for being incompatible with the structure of child benefit today. The changes were attacked after their announcement for being unenforceable, due to the difficulty of keeping checks on the number of higher taxpayers in each household.

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