Is the government sending £36 million of Child Benefit abroad?

24 October 2012


Daily Star, 24 October 2012

According to the Daily Star, UK taxpayers are losing out to the tune of nearly £40 million because EU nationals are claiming Child Benefit for children living abroad. 

The source of the Daily Star's claim is the MP Priti Patel, who at the beginning of this week asked a Parliamentary Question about how many families living in the EU are in receipt of UK Child Benefit.

Most families in receipt of Child Benefit are resident in the UK. But, as HM Revenue and Customs explain, some people living abroad may also qualify under the EU's freedom of movement laws. For instance, if you work in the UK and live abroad you may still be entitled to claim for your child - as a UK taxpayer, you're receiving money from a social security system that you've contributed to. 

Ms Patel wanted to know how many people from the European Economic Area (EEA) - excluding UK nationals - are able to claim Child Benefit for dependants, when their child is (a) living in the UK and (b) living outside the UK. 

David Gauke, Exchequer Secretary, informed Ms Patel that the Government only possessed information on those 40,251 children living outside the UK, with 23,855 families receiving a Child Benefit award from the Treasury (a figure up-to-date as of 30 September 2012). 

To put the number in context, Mr Gauke noted that approximately 7.5 million families are currently claiming child benefit for around 13 million children overall. This means that the children of foreign nationals account for 0.3% of the total.

Where does the £36 million come from?

While HMRC keeps a record of the number of families and children receiving Child Benefit, the cost attributed to these awards is not calculated. In fact, Mr Gauke explicitly states that no information on the cost to the Exchequer of EU claims is available. So how do we arrive at a figure of £36 million?

A Child Benefit award is the total amount of money paid to the mother of a family for the upkeep of her children. In other words, the number of Child Benefit awards is equal to the number of families. The value of a Child Benefit award will vary depending on the number of children in a particular family.

We know that there are 23,855 non-UK EEA "families" in receipt of at least £20.30 per week in child benefit (the amount payable for an only child or the eldest child in a family). This produces an annual bill of £25.2 million.

But there are 40,251 children compared to 23,855 awards. So, as we would expect, there are more children than there are families. Or, to put it another way, some families have several children. So we now need to account for the cost of another 16,396 children. Every additional child in each family attracts a payment of £13.40 per week. These extra children cost the UK taxpayer £11.4 million per year. 

Therefore the total cost to the UK Treasury is, so the Daily Star calculates, £36.6 million. 

Or is it?

Many of these non-UK EEA residents will be paying taxes to the UK Treasury so it's not accurate to draw a distinction between UK taxpayers and these benefit recipients. In fact, many will be entitled to claim Child Benefit because they work in the UK and, at least in theory, have paid into the social security system.

According to Ms Patel, the fact that EU residents can claim Child Benefit is "an abuse of the benefits system". However, there is another side to the ledger, which neither Ms Patel nor the Daily Star refer to: we don't know how much these individuals contribute to the Exchequer. 

What's more, Mr Gauke explicitly states that the government does not calculate the cost to the Treasury of EU nationals claiming Child Benefit. This is in part because "not all such awards are made at full UK rates". In place of official statistics, the Daily Star has generated its own cost analysis. But, as we have shown, this is inevitably flawed.

Flickr image courtesy of theirhistory. 

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