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18 October 2010

Osborne plans another raid on child benefit

Child benefit set to be abolished for over-16s as welfare is squeezed again.

By George Eaton

Despite the trouble it caused the coalition the first time round, it looks like George Osborne is planning another raid on child benefit. Everything we’ve heard suggests that the benefit will be abolished for all children over 16 – a political gift for Labour. Unlike the earlier cuts, this will hit families across the income scale, not least the poorest, to whom child benefit is disproportionately valuable. And Cameron’s earlier defence – that it is wrong to tax the poor to fund middle-class welfare – will be irrelevant in this case.

Conversely, it appears that the coalition is now not planning to cut the Winter Fuel Allowance, something that will make it harder to justify the child benefit cuts. An all-out assault on universal benefits would at least be intellectually coherent. Meanwhile, a story in today’s FT is very revealing about Osborne’s overall strategy: to squeeze welfare in order to limit departmental cuts.

It notes:

Osborne has even been trying to match Labour’s plan to cut unprotected departmental spending by 20 per cent, compared with his original plan of 25 per cent. His aides admit this is “optimistic”, while Labour scoffs, saying it could only be achieved by financial sophistry on a grand scale, including changing baselines and adding contingency reserves.

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There’s no chance of Osborne achieving average cuts of 20 per cent but don’t be surprised if he still trumps lower-than-expected cuts in defence, education and other areas.

As for Labour, we’ll learn more about their defict strategy – likely to involve something close to a 50:50 split between spending cuts and tax rises – when Alan Johnson gives his first speech as shadow chancellor in the City at around 11am today. Check back for more analysis and reaction soon after he does.