Analysis of the current debate on universal benefits.
The Observer’s “Labour set to target middle class benefits” splash yesterday reported that, “The middle classes could have to bear the brunt of cutting the national debt amid growing debate in the Labour party over whether universal benefits, including the pensioners’ winter fuel payments and child benefit, can be sustained.”
“I’ve always supported the idea of universal child benefit. But if there have to be cuts, then taking away child benefit from the better off, and the winter fuel payment from richer pensioners, would seem sensible ideas and are on Labour’s agenda.”
So what would this mean in practice?
Research by Reform in their, “Back to black: Budget 2009 paper,” (p.24) outlined that £7.15 billion could be saved from cutting Child Benefit, tapering the family element of the tax credit, and allowing for a £5 billion increase in the Family Element and Child Tax Credit to address child poverty concerns. Abolition of the winter fuel payments would save £2.7 billion.
The IoD/TPA report has a greater saving of £8.45 billion from abolishing both Child Benefit and the Child Trust Fund and bringing in a less generous increase in the Family Element of the Child Tax Credit of £4 billion.
And what about the arguments against? In a press release on Friday, Kate Green of the Child Poverty Action Group said:
“The Taxpayers Alliance and Institute of Directors propose abolishing child benefit, the popular, effective and well targeted scheme on which many families rely, and replacing it with a complex, error prone and expensive to administer means tested system. Child benefit is the cornerstone of policy to support families, to means test now wouldn’t just throw the baby out with the bathwater but the bath as well.”
Mike Smithson on Political Betting says, “All this talk of making the “middle classes” the target for taxation and cuts might go down well at the TUC but it will add, surely, to [Labour’s] electoral challenges.” But not with TUC General Secretary Brendan Barber who spoke in similarly emotive terms to Kate Green on the Today programme when he said, “I don’t want to see some of those very important universal benefits reduced or tampered with.”
Barber’s colleague Nicola Smith makes a more hard-headed defence on Touchstone: “universal entitlements have been continually proven to be the best means to ensure that those in the greatest need can access them … in 2000-01 while take up for Child Benefit was found to be near to 100 per cent, means-tested benefits showed take-up shortfalls.”
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