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Osborne can go even further on middle-class benefits

4 October 2010

11:04 AM

4 October 2010

11:04 AM

George Osborne had been expected to subject child benefits to tax. Instead he is to
abolish them entirely for higher-rate taxpayers. I’ve spent this morning talking to friends, whose judgment I
respect, who are furious about Cameron hitting the squeezed middle. I cannot agree, and here’s why. We are not talking about the "squeezed middle" here – of the 30.5 million income
tax payers in Britain, just 3 million pay the top rate of tax (figures here). They’re the best-paid 10 percent – and I have
never worked out why the tax of the average worker (who’s on £22k) should be higher to afford the payment to those on twice as much money. Osborne reckons he will save £1 billion by
this measure. If there are to be cuts, this strikes me as a fair cut.

Indeed, why stop there? Winter fuel payments should be next: this is a misnomer, a New Labour scam hurriedly assembled to try and buy votes to recover from pensioners. So-called Winter Fuel
payments are sent before Christmas, long before the winter fuel bill arrives. They are sent to expats in the Costa de Sol, and – as Policy Exchange’s Robert McIlveen pointed out on Coffee House – 82 percent of Winter Fuel payments go to people who are not
in fuel poverty. There is a fortune to be saved here, and the money could be diverted into a system that can reduce one of the most under-reported scandals in Britain: that each winter at least
22,000 pensioners die of the cold. (Imagine the outcry if a tenth of this number died due to a cause that could be related to global warming).


Finally, bus passes. A system where 60 percent of FTSE100 chief executives qualify for free bus travel clearly has something wrong with it. I have it on good authority that Labour was planning to
axe this – seeing it as a license for the bus companies to print money. Ending it would save £1 billion. But then Cameron got into a panic, promised he wouldn’t cut for pensioners (their
internal polling showed that Labour’s claims to the contrary were cutting votes) and ruled it out. Labour, amazed, quietly shelved their own plans to do the same.

Middle-class benefits have dodged the axe for far too long. Cutting them, and using the money to help take the low-paid out of tax, makes plenty of sense. There is scope for Osborne to do much
more.


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