Why Labour would not reverse the coalition's child benefit cuts

The party believes in shifting spending from universal benefits such as child benefit and the winter fuel allowance to services such as childcare and social care.

After Ed Balls announced earlier this week that Labour would remove the winter fuel allowance from the wealthiest 5 per cent of pensioners, I wrote that it was a sign that the party would not seek to reverse the coalition's cuts to child benefit. Having made the argument against universalism in the case of winter fuel payments, it becomes harder to make it in the case of child benefit. 

This morning, the BBC has confirmed my suspicions, reporting that "a future Labour government would not reverse cuts to child benefit made by the coalition". This is partly for the obvious reason that it would be very expensive to do so. Given that public spending, as Balls indicated in his speech, will continue to fall under a Labour government, it will be hard to justify spending £2.3bn on restoring the benefit to individuals earning over £50,000 a year, who rank among the top 8 per cent of earners in the country. 

But the decision also likely reflects a wider shift in Labour thinking. Influential figures such as IPPR director Nick Pearce and Gavin Kelly, the chief executive of the Resolution Foundation, have recently argued that the party should switch spending from universal benefits such as the winter fuel allowance and child benefit to services such as social care and childcare. This is not just because the funds for improved provision cannot be raised through taxation alone, but also because universal services (most obviously the NHS, but also comprehensive education and Sure Start) have generated more enduring public support than cash benefits. It is notable, for instance, that while the government was able to win majority support for the cuts to child benefit, it could never hope to do so in the case of the NHS.

But despite the economic and political logic of the move, it will prompt anger among those such as Peter Hain, who retain a traditional social democratic commitment to universal benefits. The case of child benefit is a good example of what Richard Titmuss had in mind when he warned that "services for the poor end up being poor services". While removing child benefit from higher-earners, the coalition has simultaneously frozen it in cash terms for three years, a real-terms reduction of £1,080 for a family with two children. But rather than seeking to restore child benefit to its previous value, Labour, for the reasons I've outlined, is likely to focus on investing resources in childcare. 

Ed Miliband speaks at the CBI's annual conference on November 19, 2012 in London. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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Scotland's huge deficit is an obstacle to independence

The country's borrowing level (9.5 per cent) is now double that of the UK. 

Ever since Brexit, and indeed before it, the possibility of a second Scottish independence referendum has loomed. But today's public spending figures are one reason why the SNP will proceed with caution. They show that Scotland's deficit has risen to £14.8bn (9.5 per cent of GDP) even when a geographic share of North Sea revenue is included. That is more than double the UK's borrowing level, which last year fell from 5 per cent of GDP to 4 per cent. 

The "oil bonus" that nationalists once boasted of has become almost non-existent. North Sea revenue last year fell from £1.8bn to a mere £60m. Total public sector revenue was £400 per person lower than for the UK, while expenditure was £1,200 higher.  

Nicola Sturgeon pre-empted the figures by warning of the cost to the Scottish economy of Brexit (which her government estimated at between £1.7bn and £11.2.bn a year by 2030). But the country's black hole means the risks of independence remain immense. As a new state, Scotland would be forced to pay a premium on its debt, resulting in an even greater fiscal gap. Were it to use the pound without permission, with no independent central bank and no lender of last resort, borrowing costs would rise still further. To offset a Greek-style crisis, Scotland would be forced to impose considerable austerity. 

Nor would EU membership provide a panacea. Scotland would likely be forced to wait years to join owing to the scepticism of Spain and others facing their own secessionist movements. At present, two-thirds of the country's exports go to the UK, compared to just 15 per cent to other EU states.

The SNP will only demand a second referendum when it is convinced it can win. At present, that is far from certain. Though support for independence rose following the Brexit vote, a recent YouGov survey last month gave the No side a four-point lead (45-40). Until the nationalists enjoy sustained poll leads (as they have never done before), the SNP will avoid rejoining battle. Today's figures are a considerable obstacle to doing so. 

George Eaton is political editor of the New Statesman.