David Prosser: Attacking the middle classes by stealth

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The Independent Online

Outlook The untouchable nature of the middle classes has become one of those touchstones of modern politics. Labour and the Tories alike continue to live in fear of headlines accusing them of attacks on the middle classes, despite the unspoken consensus that hefty spending cuts and tax rises are inevitable as we seek to mend the hole in the public finances.

A paper published today by the think-tank Reform may give our politicians a way out. The cost of the tax breaks and benefits we throw the way of the middle classes is £31bn a year, it calculates. A substantial pruning of these concessions – which include everything from universal child benefit to tax credits for middle earners to winter fuel payments that even the wealthiest pensioners receive – might just enable the next Government to make a start on reducing debt without the overt tax rises that are always so unpopular.

Some of the cuts would be easier than others. Abolishing tax credits for those families with annual incomes of £50,000 or more, as the Conservatives now advocate, should be doable. Tackling the fact that £8 in every £10 spent on maternity pay goes to middle class mothers may be more controversial.

In the longer term, Reform also seeks to encourage individuals to do more for themselves, effectively transferring some of the protection currently provided by the State to the private sector. Others, including a working party of insurers appointed by the Chancellor, are already discusssing similar ideas.

The prize, Reform points out is a valuable one. A £31bn cut in welfare spending would pay for an 8p cut in the basic rate of income tax (or the avoidance of an equivalent rise in the current fiscal environment).