Labour to consider options for reform of child benefit

POTENTIALLY far-reaching child benefit reforms canvassed in a paper by the Labour-sponsored Commission on Social Justice were welcomed yesterday by Donald Dewar, the party's spokesman on social security.

Commenting on a series of potential changes in one of the most politically-sensitive areas on which it will have to report to Labour, Mr Dewar said: 'It is a healthy corrective to the prejudiced treatment of children's issues which has marked government policy. This is a document looking for solutions and not for scapegoats.

'This is a discussion document which very properly sets out the options for child benefit, but it is significant that the abolition of child benefit is not on the commission's agenda.

'It deals with the problem in the round, pointing up the cruel statistics which show one child in five living in a family dependent on income support.'

But in spite of provisos that the commission's work is still exploratory - and subject to final ratification by the party - the six options set out in the paper, together with the advantages and disadvantages, show that once unthinkable reform of the benefit is now firmly on the political agenda.

Despite the paper's emphasis on the 'exceptionally high' take-up rate of the benefit as it now stands, its examination of the alternatives is bound to be exploited politically by the Government as it prepares to abandon its commitment to retaining and uprating the current system before the next election.

While Mr Dewar emphasised that means-testing was the least-favoured option in the paper, he said: 'It is right that thought be given to the best way forward. There is a public debate on these issues. This is a constructive contribution to it.'

Other options include retaining child benefit and increasing it substantially by withdrawing the married couple's tax allowance. That could be combined with the option of taxing the increased benefit.

A further possibility is an extra tax levy on child benefit, under which the benefit would be progressively withdrawn, until exhausted, at a special high rate of tax.

The paper says the benefit could be abolished and tax allowances reintroduced - a possibility floated by Peter Lilley, Secretary of State for Social Security - but it lists a number of severe disadvantages.

Alternatively, the benefit could be converted into a combined

benefit/tax credit, or restricted to the under-fives.