Welfare spending: child benefit

The charts below show child benefit spending in cash terms and as a share of national income (GDP). Spending measured in cash terms is a simple metric for analysing trends over time. But without putting the cash amount into context – by asking how much national income is devoted to different types of public spending – interpreting changes in cash spending is difficult, particularly over long time periods.

Trends in spending as a share of GDP are useful to understand how spending moves in line with the underlying economic activity that ultimately finances it via taxation. In cash terms, both spending and GDP will tend to rise over time because of population growth and inflation. Spending as a share of GDP is the most relevant metric when considering the sustainability of the public finances.

Spending on child benefit has fallen as a share of GDP over the past 30 years. This is because child benefit rates were generally uprated in line with inflation at a time when prices were rising less quickly than average earnings and GDP, and rates were frozen between 2016-17 and 2019-20. This decline was occasionally offset by one-off policy decisions to increase generosity. Child benefit spending is set to remain broadly flat in cash terms between 2023-24 and 2027-28. Child benefit rates are uprated with CPI inflation in forecast years, meaning spending is projected to fall slightly as a share of GDP after 2023-24, as GDP growth outstrips growth in prices.

Child benefit has been means-tested since 2013, via the ‘high income child benefit tax charge’. This removes eligibility for child benefit from families with at least one parent earning more than £60,000 and reduces awards on a sliding scale for those with one parent earning between £50,000 and £60,000. This reduces spending where parents choose not to claim, but where they opt to pay the tax charge, income tax receipts are increased instead.

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