Welfare 'favours the middle class'

THE middle class gains most from state education and the health service, suggesting that the welfare state does less to improve the position of the poor than the Government claims, according to a report published today.

Although the Central Statistical Office argues that the poorest one-fifth of households - those with a pre-tax income of around pounds 5,000 in 1990 - gain most welfare 'benefits in kind', the report by Institute for Fiscal Studies finds that the largest gains go to middle-income families, earning three times as much.

The main reason for this is that government support for students who leave home to study at university or college favours high-earning households.

Support for students living away from home is worth 10 times as much for the richest 20 per cent of households than for the poorest 20 per cent.

The report concludes that scrapping state support for these students, and using the money to cut taxes proportionally across the board, would leave the poor better off at the expense of the rich.

Official statistics assume that most of the gain from the Government's payment of tuition fees and grants (now partially replaced by student loans) goes to the poor, as most students have little income and come into that category.

But the IFS study argues that the benefits should be assumed to accrue more to the rich, because most students earn more after leaving college than people who have not had higher education.

The poorest 20 per cent of the population also gain little from higher education because a large proportion of them are retired.

The IFS report also argues that middle-income families gain most from the National Health Service. However, the richest one-fifth of the population gain much less than the average family because far fewer of them have to stay in hospital during a given year than do the poor. So, overall, the NHS does benefit below-average earners more than above-average earners.

The other main 'benefits in kind' are subsidies for council and housing association tenants, and housing benefit. The poor clearly gain more than the rich from this source, but the study - which uses 1987 figures - argues that the benefits for housing are less than one-tenth those for education and health.

(Graphic omitted)