Child benefit cap change considered

The Government is considering watering down its plan to strip child benefit from better-off families, Deputy Prime Minister Nick Clegg has said.

It came as disgruntled Conservative backbenchers warned of a rebellion to block the plan if ministers seek to press ahead with the scheme unchanged.

Meanwhile, Labour turned its fire on another cash-saving benefit reform, urging George Osborne to drop changes to tax credits which shadow chancellor Ed Balls believes will leave thousands of low-income families better off if they quit work.

The Treasury declined to confirm reports that the Chancellor is considering softening the impact of the child benefit reforms on middle-income families by raising the earnings threshold at which it will be withdrawn to £50,000 or even £80,000.

Mr Osborne announced at the 2010 Conservative Party conference that from January 2013 couples with at least one parent earning more than £42,745 a year - the 40% tax rate threshold - would lose their payments, saving the Treasury around £1 billion. Details of how the change will be introduced are expected in the Budget on March 21.

But the move has proved unpopular, sparking claims that lone parents and single-earner families are being penalised.

A family with one working parent earning £43,000 would lose about £1,750 a year if they have two children and £2,500 with three, but a couple who both work and each earn £40,000 would keep all their payments despite having a total household income of £80,000.

Mr Clegg told the BBC: "We have said as a Government that we are living in difficult times and asking people who earn much more money than others to give up child benefit is a fair thing to do."

But he added: "We do accept that what you do when you create these cut-offs is you create anomalies... There is a specific issue about how you administer the removal of child benefit from upper-rate earners and we have always said we will look at exactly the way that is administered."