Labour told to tax child benefit

Child benefit should be taxed for high earners but its value increased, the long-awaited report from Labour's Social Justice Commission is expected to recommend today.

It will also propose the introduction of a minimum wage and a guarantee to top up the income of the poorest pensioners without the need for a means test, but will recommend that increases in the basic state pension should become discretionary.

The report, the most comprehensive examination of the welfare state since Beveridge in the 1940s, argues that it should be transformed from 'a safety net in times of trouble to a springboard for economic opportunity'. Its recommendations are understood to include a range of measures, including some far-reaching changes to the benefit system, to move towards full employment through 'welfare to work' programmes. But the plans would involve Labour dropping its pounds 2.5bn 1992 manifesto commitment to increase the basic pension and link it to earnings rather than prices.

While it says child benefit should be increased substantially by phasing out the married couples' allowance, the commission tackles a Labour shibboleth by arguing that it should also be taxed for higher-rate taxpayers.

The commission's arguments for a minimum wage are understood to point to its introduction at around pounds 3.50 an hour - not the pounds 4 an hour being sought by unions.

Tony Blair, the Labour leader, is to give the report a warm welcome, hailing it as an important contribution to the radical shake-up of the welfare state that Labour plans.

Both Mr Blair and Sir Gordon Borrie, chairman of the commission, will stress that the report is not Labour Party policy, and Labour is determined not to have the spending commitments implicit in the report hung round its neck.

Yesterday William Hague, the Minister for Social Security, gave early warning that the Conservatives would cost the commission's proposals by asking how Labour would fund plans to pay pensions to people with few national insurance contributions.

Mr Blair is expected to support the aim of transforming the benefit system so that it helps people back into full- and part-time work through training, a new part-time unemployment benefit, and through subsidies and rebates for employers to take on the long-term unemployed. He is expected to argue, however, that Labour has some better ideas of its own for such measures than those the commission has produced.

Publication of the report presages a battle between Labour and the Government over the future of the welfare state, the Government attempting to hit back today by publishing its White Paper on the new Jobseeker's Allowance, which will cut entitlement to unemployment benefit and require claimants to sign a 'jobseeker's contract', detailing their hunt for work, in order to be paid a benefit.

Gordon Borrie, page 19