Julian Knight: Sense at last on child benefits and pensions

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The Independent Online

You probably feel a little poorer this weekend than last. First there was George Osborne's mismanaged announcement scrapping child benefit for higher rate taxpayers and then there was Lord Hutton's report on public-sector pensions.

Judging by the screeching protests from many of my journalistic colleagues, you'd have thought Osborne had decided to adopt the childcare methods of King Herod rather than bringing to an end the practice of paying a universal benefit to the top 15 per cent of earners. It should have been done years ago. Child benefit was introduced when rickets was still an issue for many British kids and it was meant to ensure that children didn't have to suffer abject poverty. Universality was adopted because it wouldn't stigmatise those who needed it and, crucially, it was paid to the mother.

These principles have long had there day and really childless people or those on low incomes shouldn't be paying for the top 15 per cent to have extra tax-free cash. And for the anomaly of two parents each earning £40,000 keeping the benefit while a households with just one higher rate taxpayer losing it? It may not strike you as fair but the alternative was an expensive and bureaucratic means test which would probably have seen child benefit amalgamated into the overburdened tax credit system. Put simply, whatever savings were made would have disappeared into the running costs of Revenue & Customs and even potentially been open to the fraud gangs which make a killing out of the current tax credit system. Were the Government truly brave, it would also kill off tax credits and use the money saved to raise all our personal allowances to the £10,000 which is supposed to be the ultimate ambition of the coalition.

Apart from the unions, the reaction to Lord Hutton's report into public sector pensions was much more measured. Accused of treachery by his Labour colleagues, Hutton's report shows the same common-sense approach he displayed in his time as a work and pensions secretary. Here is a great argument for the continuation of the House of Lords. Hutton, freed from party politics and the giant roadblock to reform that was Gordon Brown, has shown he is able to look at public sector pensions with compassion and common sense. Moving to a career average scheme and pushing some investment risk from the taxpayer on to the individual has to be the sensible way to go.

The growing disconnect between pay and conditions in the public and private sectors was revealed in 2003 when the former overtook the latter for the first time. All the talk then was of rewarding "key workers" and New Labour was gearing up for its mammoth spending splurge.

People now realise that this unfairness has to stop but without unduly hurting the lowest paid in the public sector. Hutton's report shows the way that can be done.

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