Who really gets child benefit?

Cath Elliot says that Osborne’s withdrawal of child benefit from top-rate tax-payers is “an attack on women.” I agree, but not, I fear, for reasons that Cath would like.
I refer to this paper by Laura Blow and colleagues:

Child benefit is spent, at the margin, on adult-assignable goods…it is parents who benefit from unanticipated variation in child benefit.

They estimate that for a couple not on other benefits with one child, a £1 rise in child benefit is associated with a 49p rise in spending on alchohol, a 40p rise in spending on adult’s clothing, but only a  1.4p rise in spending on children’s clothes.
For lone parents, 70p of a £1 rise in child benefit is spent on women’s clothing and 21p on alcohol.
Osborne’s move is, then, another blow for the drinks industry.
This is not because parents are selfish and glug chardonnay whilst their kids play with the traffic. Quite the opposite. Their spending on their children would be heavy anyway, so variations in child benefit lead to variations in spending on themselves.
This is a particular instance of a general principle - that the incidence of benefits and taxes does not always fall upon those for whom the tax or benefit is intended.
This is not to deny Cath’s point that child benefit is a “life-line for some women”. Quite the opposite. It is exactly that - a life-line for some women, not their children.

Comments

[Sunny_hundal]

Hmmm. There is this piece of research, linked by Yvonne Roberts, who says its shows the money was "highly likely to be spent on their welfare."

article:
http://www.guardian.co.uk/commentisfree/2009/sep/19/statebenefits-taxcredits

the research (haven't read it because it's expensive)
http://www.psi.org.uk/publications/publication.asp?publication_id=158

[David Bouvier]

Hmmm, Mr Hundal - the abstract says precisely that "women ... 'go without' in order to meet their childrens's needs", which is to say that spending at the margin goes on the women more than the children - because the spending on the children was prioritised.

Coroborating the point made in the blog post rather nicely.

[Sunny_hundal]

David - sorry, what? I read that as - women prioritise spending on children and sometimes hold back on their own discretionary spending in order to provide for their kids.

How it corroborates the view that women take that money away from kids to spend on booze is not exactly clear.

[Adam Bell]

Sunny, that's the exact opposite to what Mr Bouvier is actually saying. Extra marginal income will go on the adult rather than the child, as the child has already been prioritised. In other words, if child benefit goes over and above what's needed to look after the child, the extra money will be spent on the woman. You're presuming that recipients of child benefit are all on the breadline, which clearly isn't the case. Note the reference in the original article to 'not on other benefits'.

[John H]

I'd love to see a newspaper pick this up and run the headline, "CHILD BENEFIT BLOW TO UK DRINKS INDUSTRY". :-)

I'm not sure this matters though. Child benefit is paid to recognise the additional costs of raising children. I don't see how that principle is affected by the fact that most parents, if their income falls, will cut back on themselves before their children.

Because I assume that's what the research is really saying: not that feckless middle-class mothers think, "Aha! The child benefit's arrived! To the off-licence!", but that if the benefit were taken away then those items are the ones that would be cut from their spending first.

(Speaking from experience, the arrival of the child benefit in our account each month is of great help to our overall finances - especially when the four-weekly CB cycle lands in the week or so before pay day! - rather than being something we specifically ringfence on spending for our children. But that doesn't mean it won't hurt to lose it.)

[Rob]

Sunny, I think the idea is this:

With no child benefit at all, parents will devote substantial resources to their children, and will cut back on expenditure on themselves. With CB, they will spend more on themselves but *proportionally* little extra on their children. At face value, you could take this to mean that very little of CB goes "to the children".

However, it's not hard to come up with some reasons why this isn't as clear as it seems. Parents may be wracked with guilt at their inability to provide their children with everything they might want (and kids generally want more than their parents can afford), and so might cut back on spending on themselves to assuage the guilt - a form of self-punishment. Given CB, they might feel two things: 1) that CB represents an appropriate amount of money to spend on a child, which might actually be less than what the parent originally thought and 2) CB means that "someone else" is paying for the kids, which makes the parent less responsible (and thus less guilty-feeling) for the fact that this might not seem like enough, both of which make it OK to start spending on themselves again. The left basically feels that parents are the victims of unfair guilt here, and should be helped by being given more cash, and the right feels that the guilt is entirely appropriate and wishes to avoid blunting it with cash handouts.

[John H]

Rob: I'm not sure many parents actually think in those terms. I've never sat down and thought, "How much is an appropriate amount to spend on our children?", let alone taking child benefit as a measure of that. ("Right, kids, that's your £185.60 spent for this month. I'm off to the pub.")

It seems frankly a little bizarre to analyse this in terms of how much parental guilt ought to be induced or assuaged by the state.

[Jay]

I think I get this... I have available to spend each month $WAGES + $CB, and I spend 2x$CB on my child (because that reflects his needs). £1 increase in $CB means that [$WAGES + $CB] is now a larger figure, and [$WAGES + $CB - 2xCB] is therefore higher. As that's what I have to spend on myself, the spending on myself consequently goes up.

The fact that his needs and $CB are not equal to start with means that you can't really judge anything about how 'selfish' or otherwise I am, but never mind.

For reference: actually I *don't* get $CB for him, my ex-husband does, for various complicated reasons. And my wages are low enough that I get a number of in-work credits. But I still spend more than 2x$CB on the child, because the CB and the childcare credit *just* cover the cost of his after-school childcare. If I left work we'd all be better off. :(

[Jay]

... £1 increase in $CB means that [$WAGES + $CB] is now a larger figure, and [$WAGES + $CB - 2xCB] is therefore higher. As that's what I have to spend on myself, the spending on myself consequently goes up.

Of course, this actually is a *lower* figure, unless my take-home income goes up at the same time. But usually it does, because of the in-work benefits.

[Jonathan]

I am surprised you didn't link to your old post here:

http://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2007/03/child_benefit_f.html

[Hazel Edmunds]

Women benefit not kids? Who are you kidding? Do the children spend the money? NO. It's the parents who spend the family income and if some of it goes on alcohol so what. Pay the money to the kids and it would go on chocolate and toys!

[חדרי תינוקות]

Hi!! I am surprised by your views, it is time to reconcile our folly. So that, we can give them a better life. Thanks for sharing.

[Savings For Children]

Interesting way of looking at it. I don't think child benefit should be universal, but I'm not sure I agree with a sudden cut-off point at the proposed amount. I think a more gradual reduction would be better.