Labour would extend child benefit cap

Written By Unknown on Senin, 22 September 2014 | 16.50

22 September 2014 Last updated at 10:08 By Brian Wheeler Political reporter, Labour conference, Manchester

Families receiving child benefit would continue to see the value of their payments fall in real terms for the first two years of a Labour government.

Ed Balls would extend the coalition's cap on increases in the benefit - due to expire in 2016 - for a further year.

The shadow chancellor will announce the policy in a speech to Labour's annual conference in Manchester.

The move is part of a package of measures aimed at proving Labour is serious about "balancing the books".

Under Mr Balls' plans, child benefit payments would not rise in line with inflation but by a fixed rate of 1% per year until 2017. The policy is already in place until 2016, having been announced by the coalition, but Labour's move would see it continue for another year.

Millions of households which receive the benefit would be affected by the move.

At the moment, one parent can claim £20.50 a week for an eldest child and £13.55 a week for each of their other children up to 16 and, in some cases, until they are 20 years old.

Continue reading the main story 'Tough decisions'

Labour has repeatedly criticised the coalition government's benefit cuts, including Mr Osborne's decision to remove child benefit for higher earning households, which Mr Balls said in 2013 created "huge unfairness".

But he will say in his conference speech that Labour is set to inherit an annual budget deficit of £75bn if it regains power and as a result will not be able to reverse most of the cuts and will have to introduce some of its own.

Shadow Chancellor Ed Balls outside Labour party conference venue in Manchester

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Shadow Chancellor Ed Balls: "We want to get the deficit down in a fair way"

He will say: "We will have to make other decisions which I know will not be popular with everyone.

"At a time when the public services that pensioners rely on are under such pressure, we will stop paying the winter fuel allowance to the richest 5% of pensioners.

"I want to see child benefit rising again in line with inflation in the next parliament, but we will not spend money we cannot afford.

"So for the first two years of the next parliament, we will cap the rise in child benefit at 1%. It will save £400m in the next Parliament. And all the savings will go towards reducing the deficit."

Mr Balls says Labour would balance the books in a "fairer" way than the Conservatives because they would reinstate the 50% top rate of income tax.

Deficit cutting

Labour has said the coalition has missed its borrowing targets and therefore it will have to take tough decisions if it regains power next year.

It has said it wants to eliminate the annual budget deficit - the difference between what the government generates in revenue and what it spends - by 2020.

Borrowing has fallen in the past four years from £136.8bn in 2010-11, the first year of the coalition government, to £107.7bn in 2013-14.

The independent Office for Budget Responsibility has forecast that borrowing will continue to fall from £95.5bn this year to £75.2bn in 2015-16, £44.5bn in 2016-17, £16.5bn in 2017-18, before recording a small surplus in 2018-19.

"Now cannot be the right time to give the richest one per cent of people in the country a £3bn tax cut. So as we get the deficit down in the next parliament, the next Labour government will reverse this Tory tax cut for millionaires.

"Because Labour will balance the books in a fairer way."

'Costed'

Mr Balls will also announce plans for a 5% pay cut for government ministers with their pay to be frozen until the deficit has been cleared.

"The next Labour government will get the deficit down," he will tell Labour delegates.

"And Ed Miliband and all my shadow cabinet colleagues are clear it will mean cuts and tough decisions and we will take the lead."

Labour used the first day of its final conference before the general election to unveil plans to increase the minimum wage to £8.

Analysis by personal finance reporter Kevin Peachey

Much of the focus at the start of 2013 - when big changes were made to child benefit - was on those high-income parents no longer entitled to the money.

But arguably more significant was the fact that lower-earning mums and dads were taking a hit in real terms too.

The benefit was frozen for three years from 2010 and is not rising in line with the cost of living for another two.

Remember, it is not the only benefit witnessing a 1% cap. Others include maternity pay and jobseeker's allowance.

Labour's proposals would tighten the financial squeeze on parents. But only when we see all parties' tax and benefit proposals in full will it be clear who is exerting the greatest pressure on our wallets and purses.

But that was overshadowed by an ongoing row about English devolution in the wake of Scotland's No vote in Thursday's independence referendum.

Mr Balls will attempt to shift the focus back on to Labour's economic policies - an area which the polls say Labour lags behind the Conservatives.

He told the BBC that all Labour's manifesto commitments would be "costed and paid for".

But the Conservatives accused Mr Balls of making unfunded spending commitments - on policies such as its jobs guarantee for young people, which Labour says will be paid for by a tax on bankers' bonuses.

They said the shadow chancellor's plan to cut ministerial pay would only amount to 0.003% of the deficit.

Conservative MP John Redwood told the BBC: "I am glad they [Labour] realise they have got to do something about the deficit.

"I don't know whether that is the best thing to do, it's a rather small sum of money compared to the £70bn odd deficit they have got to get rid of. But I guess every little helps."

Mr Balls was in a cuts controversy of a different kind on Sunday, when he accidentally elbowed a journalist in the eye during a charity football match.

Does your family receive child benefit? What is your reaction to Labour's proposals? Email your response to haveyoursay@bbc.co.uk


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