Blunkett in call for tax relief cuts

DAVID BLUNKETT last night became the first member of John Smith's shadow Cabinet to support cuts in mortgage tax relief as part of a combined tax and benefit system to reduce the poverty trap, writes Colin Brown.

Cutting mortgage tax relief has been too controversial for either the Government or the Opposition, but the Labour spokesman on health intensified the pressure on the Labour leadership to adopt a more radical policy.

Mr Blunkett said the savings could help those in poverty. A tax and benefits system would enable those in part-time work to continue to claim benefits to help them escape poverty, Mr Blunkett said in a report to his party's policy review on the welfare state.

He said: 'A separate investigation of how to radically change entitlement to mortgage tax relief and the current administrative nightmare of housing benefit must be an urgent priority.

'Integration of tax and benefit would necessitate a radical shift in the hidden welfare benefits which are currently available through tax allowances . . .

'National Insurance, which has now become a tax, should therefore be integrated into income tax.'

Mr Blunkett also said compulsory, full-time community service for everyone aged 16 to 21 should be given serious consideration.