David Cameron has defended the decision to remove child benefit on Monday from those on higher earnings as “the right approach”.
But the prime minister admitted that many of the 15 per cent of parents affected were not “rich”.
Amid a political storm about the implementation of the changes, Mr Cameron insisted that middle earners had to make a contribution to cutting the deficit, arguing that the very rich and those on welfare were already paying their share.
“I’m not saying these people are rich but it’s right they make a contribution,” he said, saying that the changes would save £2bn a year.
From Monday child benefit will be withdrawn from any household with a parent earning more than £50,000. A taper will apply so that the benefit will be taken away completely once earnings hit £60,000.
Mr Cameron acknowledged the outcry over the operation of the new policy, which will see hundreds of thousands of parents forced into the self-assessment tax system.
But the prime minister told the BBC: “It’s the right approach. If someone in a household is earning more than £60,000 they should not be receiving child benefit.”
Some 1.2m households are expected to be affected by the change but HM Revenue & Customs has only managed to identify and write directly to 800,000 in advance of the reform.
David Gauke, Treasury minister, said about 200,000 families had voluntarily given up the benefit before the January 7 deadline, which he said was “slightly above what we’d expected at this stage”.
But Labour said that still meant that hundreds of thousands of families would have to return the child benefit by filling in self-assessment tax returns – many of them for the first time.
“It’s a shambles, it’s a complete shambles,” Ed Balls, shadow chancellor, told Sky’s Murnaghan programme. “We’re going to have many, many hundreds of thousands of people who will end up filling in tax returns because they didn’t realise they were supposed to apply by today not to get their child benefit.”
Mr Balls is also focusing on an anomaly where two parents earning £49,000 each would keep their child benefit, while a single earner household with a total income of £60,000 would lose all of it.
But the measure has not provoked the kind of public outrage that accompanied the introduction of the poll tax in the late 1980s – another Conservative tax change that hit the party’s core supporters.
Mr Cameron hopes to rebuild some credit with wealthier parents this month when the coalition publishes plans to cut the cost of childcare, a move which may partly offset the loss of child benefit.
The coalition has agreed a deal where parents will be able to offset some childcare costs against tax, while nurseries will be allowed to increase the ratio of children per carer to bring down costs.
Mr Cameron believes he is winning the welfare argument with Labour, arguing that he is putting “fairness” at the heart of coalition reforms, including plans to impose a three year 1 per cent cap on benefit rises.
That plan will be put to a vote in the Commons on Tuesday with Labour opposing the cap. Mr Balls argues that it hits hard working families in receipt of tax credits, rather than simply people on the dole.