It emerged yesterday that the Labour leader and Gordon Brown, the shadow Chancellor, had discussed a figure of pounds 100,000 a year as the income above which people with children aged between 16 and 18 would lose child benefit. But they rejected the idea of naming a figure because it would invite questions about their plans for income tax.
Mr Brown said last week that Labour would make the "relevant financial decisions" on taxes, benefits and public spending "after the Conservative Budget [in November] and in our manifesto".
But, as Labour delegates prepare to gather in Blackpool this weekend, Mr Brown now faces a bill for up to pounds 1bn a year as the price of heading off a rebellion on pensions.
Baroness Castle has proposed restoring Labour's historic policy, abandoned since the last election, of linking the value of the state pension to average earnings. But Harriet Harman, Labour's social security spokeswoman, is today writing to union leaders to plead with them not to back the plan. Ms Harman warns the unions, which still hold 50 per cent of conference votes, that Lady Castle's plan would be paid for out of the pounds 3.5bn state subsidy to company pension funds, which could cost union members pounds 550 a year.
Ms Harman told GMTV: "I am confident that the Labour Party conference will agree that the first priority of a Labour government and a Labour social security secretary of state must be the poorest pensioners."
She stressed Labour's objective of all pensioners getting the social security benefits to which they are already entitled. But that could need up to pounds 1.26bn a year more in income support, housing benefit and help with council tax, according to the Department of Social Security .
"It's not a spending commitment. It's what they are already entitled to," a spokeswoman for Ms Harman said.
But the money would have to be found from somewhere, which could disrupt Labour's tax plans, now close to being finalised. It is clear that Labour would not seek to reverse any tax cuts made in November by Kenneth Clarke, the Chancellor, and that National Insurance will not be imposed on earnings above pounds 33,660 a year. The current starting point of the 40p-in-the-pound top rate of income tax, about pounds 30,000 a year, is likely to stay.
What is not yet finally decided is whether a new 50p tax rate will be imposed on incomes over about pounds 100,000 a year and whether a new starting rate of 15p on the first slice of taxed earnings will be proposed, or simply offered as an aspiration.Reuse content