Middle class faces tax on child benefit

GORDON BROWN has suggested that he may tax the child benefit payments of the well-off in future despite dropping the plan from this month's Budget.

In a letter leaked to The Independent, the Chancellor said: "If child benefit is to be raised in future, I believe there is a case - in principle - for higher rate taxpayers to pay tax on it. We will bring forward recommendations for reform in due course."

Last night the Tories claimed the letter to Tessa Jowell, the Health minister, revealed that Mr Brown had not abandoned his plans to tax child benefit. They said this would amount to "quadruple whammy" on the middle classes after the Chancellor scrapped mortgage relief and the married couple's allowance and included a new means-tested children's tax credit in his Budget.

The Treasury insisted the letter, written four days before the Budget, had been overtaken by Mr Brown's announcement of the new tax credit, which will not be paid to people earning more than pounds 38,500 a year.

Although the Chancellor is expected to see how the credit scheme works before taxing child benefit, he declined at a post-Budget press conference to rule out imposing tax at a later date.

There has been speculation that Mr Brown dropped the proposal from his Budget after Tony Blair expressed concern that it would alienate "middle England". Treasury officials had warned of administrative problems and that the independent taxation of men and women would be jeopardised.

The Tories claimed the letter indicated Mr Brown's future plans, since he would have been well aware of his Budget decisions when it was written.

Iain Duncan Smith, the Tory spokesman on social security, said: "It is now absolutely clear that the Chancellor has no intention of giving up on his proposal to tax child benefit."

He said this explained why Labour MPs had watered down a critical report drafted by Archy Kirkwood, the Liberal Democrat chairman of the Social Security Select Committee, which had investigated the issue. Mr Brown admitted this week that Don Touhig, his Parliamentary aide, had been sent a leaked draft of the chairman's report.

"Mr Brown should now come clean about his future plans," said Mr Duncan Smith. "It seems that he is using the tax credit as a trial run and that he will tax child benefit at a later stage. He knows where he is going."

The Tory frontbencher said the Government should strengthen marriage as an institution, which was the single most important factor in reducing child poverty. "Policies that simply follow children with money will not lift them from poverty but will simply accelerate marriage breakdown and increase welfare dependency," he said.

The row overshadowed a speech by the Prime Minister in which he pledged an "historic mission" to eliminate child poverty in Britain within 20 years, promising a pounds 6bn package of measures.

Setting out his plans for a "quiet revolution" in the welfare state, Mr Blair said children were the Government's top priority. Britain's child deprivation levels were "frightening", with almost one in three living in poverty, he said.

The Government's plans would lift 700,000 children out of poverty by the end of this Parliament ."Being poor should not be a life sentence. We need to break the cycle of disadvantage so that children born into poverty are not condemned to social exclusion and deprivation."

Mr Blair promised: "Our historic aim will be for ours to be the first generation to end child poverty. It will take a generation. It is a 20- year mission, but I believe it can be done if we reform the welfare state and build it around the needs of families and children."

Martin Barnes, director of the Child Poverty Action Group, welcomed Mr Blair's commitment but said Britain could afford to end child poverty in 10 years rather than 20. "All it requires is the political will."