Blair rift over child benefit cut

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Tony Blair is facing a Shadow Cabinet fightback against controversial proposals for withholding Child Benefit from parents of children still at school and in further education.

Senior shadow ministers are divided over the plan which Mr Blair and Gordon Brown, the shadow Chancellor, are anxious to see promoted as one of the "tough choices" both have warned the party it will have to face before the next election.

Chris Smith, Labour's social services spokesman, and David Blunkett, the education spokesman, are among front-benchers who are known to have grave doubts about the idea.

That emerged yesterday amid clear expectations that Labour will reject plans canvassed by the Social Justice Commission for taxing the pounds 6bn benefit for parents of all age groups because such a move would face virtually insurmountable practical and political problems.

Mr Blunkett is also understood to have doubts over whether such a change represents the most practicable method of maximising resources for training and educating young people in lower income groups. He is currently examining whether the pounds 500m a year spent on the Youth Training Scheme is producing value for money.

Mr Brown made it clear last month that Labour now had no plans to introduce means testing of Child Benefit as a whole. The party leadership has accepted that to raise substantial funds the move would hit middle income groups with potentially disastrous political results.

That leaves only two possibilities - taxing child benefit for upper income groups or removing it from parents of children of 16 and over - while targeting resources to ensure that poorer parents are able to ensure their children can continue in education and training. Mr Smith's team, with Mr Brown's probable approval, is expected to rule out the former on the grounds that it is a benefit paid directly to mothers, many of whom pay little or no tax in their own right. If the tax was taken from couples it could cut directly across the principle of independent taxation for men and women.

The argument in favour of the latter is that post-16 Child Benefit is already not universal since it is not paid to parents of young people in work. Moreover it goes to some of the richest couples in the country.Scrapping it would save pounds 700m but Mr Smith is known to have serious doubts about any move which could be seen as a disincentive to parents to keep their children at school. Conservative ministers, led by John Major, have already attacked the proposal for doing just that.

Mr Smith approved in advance a passage in Mr Brown's speech last month which made it clear that child benefit for parents of 16 would be examined as part of a review of all funding of post-16 education. But members of his team were alarmed at advance briefings which appeared to confirm that it was likely the party would scrap the benefit for parents of children in school or further education.

Mr Brown dismissed as "fantasy journalism" a Sunday newspaper report that Mr Blair had "overruled" him over his proposals to axe child benefit for parents of 16-19s.

He said: "We are having a review on child benefit. We're looking at every aspect of finance after the age of 16. We will publish the results of our review when it is completed.

"But of course everybody knows that among young people at the age of 16 thousands are denied the opportunity both to stay at school and to go to further education colleges simply because the system of financing is chaotic and it is unfair."