Labor is quietly suspending child benefit reform, which could have made the system fairer for single parents

Many parents will be left without money as the chancellor quietly set aside planned child benefit reforms in her first budget.

The government will no longer continue with reforms to base child benefit for high earners on a household’s total income, rather than on the income of just the highest earner.

Many believe this system unfairly penalizes single parents with higher incomes.

A household with two parents earning £59,000 each (a total of £118,000) will receive full child benefit, while a household with one parent earning £60,000 will have all or part of the benefit withdrawn.

Child benefit is currently £25.60 per week for the eldest and £16.95 per week for each additional child.

It is paid if you are responsible for a child under 16 years of age, or under 20 years of age if still in school or on an approved course.

However, the government is starting to claw back child benefit from households where the highest earner has an income of more than £60,000, after Jeremy Hunt raised the threshold from £50,000 in his last Budget.

Child benefit is then withdrawn entirely once the highest earner earns more than £80,000.

Hunt had promised to significantly reform the charge and move to a system based on household rather than individual income by 2026.

Since its introduction a decade ago, it has come under fire for placing an additional burden on working parents, especially single parents.

However, Labor will no longer go ahead with the changes, according to a document published by the Treasury on Wednesday.

It said this would have created ‘significant budgetary costs of £1.4 billion in 2029-30 if the threshold had been set at £120,000 to £160,000, with no family losing out.’

By keeping the HICBC based on total individual income rather than household income, more parents will be left out.

As well as single parents, families where one parent earns more than £60,000 and the other does not could also be affected.

For a couple earning £30,000 and £60,000, the higher earner will start paying back part of the child benefit, while for a couple earning £55,000 each, the child benefit will be retained in full.

If Labor had stuck to plans to calculate the levy based on household income, a couple earning £55,000 each would not receive child benefit because they would jointly exceed the £80,000 threshold at which child benefit payments would stop altogether.

Keeping the child benefit threshold at £60,000 is also not keeping pace with inflation. If the original threshold of £50,000 had increased with inflation since its introduction, it would be £67,000. Meanwhile, if it had risen at the rate of average wages, it would be £71,774.

Like the frozen income tax thresholds, this creates a massive stealth tax attack on working parents.

The government said it would make some adjustments to the system, including allowing workers to pay their HICBC through their tax bill from next year.

This means that parents who are paid via PAYE no longer have to complete their own tax returns.

It also said it would pre-fill self-assessment tax returns with child benefit details for those who don’t.