Page last updated at 07:15 GMT, Thursday, 22 October 2009 08:15 UK

Call to end middle class benefits

A mother and her child
Child benefit is taken up by nearly 100% of the eligible population

Benefits for the middle classes should be taken away to avoid higher taxes, a centre-right think tank has suggested.

Reform says payments including maternity pay, child benefit, the winter fuel allowance and TV licences for the elderly could be scrapped.

It says the UK spends £31bn a year on such benefits, equivalent to an extra 8 pence on the basic rate of income tax.

In a report, it also argues that flexible savings accounts should be set up to replace pension contributions.

Chancellor Alistair Darling has predicted that public borrowing will reach a record £175bn next year.

Reform says while times are hard, the leanest welfare system focused on the most needy, is all the UK can afford.

It defines middle class as a household where the total income equates to at least £15,000 a year for each adult and £5,000 per child.

The message is provocative and reignites the long running debate about the scope of the state, says BBC social affairs correspondent Sue Littlemore.

Small print

In its report, The end of entitlement, Reform suggests the "middle classes are being bribed with their own tax money".

It says there is a political consensus for limited aspects of welfare reform but to deliver real benefits the UK needs a radical plan.

Reform says recent proposals by the Conservatives did "not go far enough" as they promised to keep many middle class benefits in place.

In his conference speech, shadow chancellor George Osborne was wrong to pledge to keep winter fuel payments, free TV licences for the over-75s and child benefit for middle class families, it says.

Reform argues his plan to means test child trust funds and abolish tax credits for people on an annual income of more than £50,000 would only save £700m a year.

At the same time, the welfare system also has to improve for the poorest, the report says.

Reform says rules on social enterprises and other organisations providing welfare-to-work services are too tight for them to make a real difference to the unemployed.

Director of Reform Andrew Haldenby said: "The middle classes need to read the small print of the welfare state."

"They may think that benefits and subsidised higher education are a good deal. In fact they will cost an extra 8p on the basic rate of income tax in the next Parliament because of the hole in the public finances."

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