Lone parents' benefits to be sacrificed for tax cuts

Lone-parent benefits of pounds 5.20 a week are to be scrapped for new claimants in spending cuts on the welfare state to make way for tax cuts in tomorrow's Budget by the Chancellor, Kenneth Clarke.

It will be defended as a move to bolster family values by Peter Lilley, the Secretary of State for Social Security, in a debate on welfare benefits on Thursday. Abolishing the premium payments will save pounds 270m a year.

The City believes Mr Clarke has enough to cut taxes by 3p in the pound as reported in The Independent on Saturday, but he is likely to direct some of the additional revenue to slashing the public-sector borrowing requirement.

Whitehall sources are predicting an "imaginative" Budget, which could see rises in duty on "alco-pops" to curb under-age drinkers, and on tobacco, but help for the beer industry to combat illegal cross-Channel imports of cheap beer. Spending on health, schools and the police will increase, but there will be deep cuts in spending on road building, grants for housing- association house building, and the welfare budget will bear the brunt.

The up-rating of benefits to be announced on Thursday will be linked to inflation in September, which means benefit increases will be lower than the current rise in the retail price index.

Mr Lilley is expected to announce that the lone-parent premium will be frozen for all those now claiming. The separate one-parent benefit, worth pounds 6.30 a week, is likely to escape being frozen but will be merged with child benefit next April.

One million lone parents who claim income support will continue to receive the additional pounds 5.20 top-up through lone-parents' premium. It has been accused of working against the family because it could leave some couples better off when they split up.

Last year, Mr Lilley announced it would be frozenfor the first time, and Whitehall sources confirmed yesterday that abolition was in line with his plans.He has been encouraged to go ahead with scrapping it because it could prove popular with his own side.

The cuts in lone-parent support were attacked as "short-sighted" last night by Labour. A spokesman for Harriet Harman, the shadow Secretary of State for Social Security, said it would make the plight of lone parents worse and do nothing to help them to get work.

A report in the Independent on Sunday yesterday showed that three out of 10 children in Britain were being born into poverty. "It is going to make matters worse, and it will increase the poverty trap," said Ms Harman's aide.

Ms Harman is proposing the transfer of benefits to produce more childcare support to allow lone parents to go to work and get off benefit.

The Budget cuts will include a pledge to carry out a crack-down on social security fraud leading to savings of pounds 1bn.

But ministerial sources admitted that it cannot be achieved by the action which is promised in the Fraud Bill, due to be debated in the Commons today.

The bill gives the authorities the power for the first time to compare Inland Revenue tax returns and VAT returns with claims for social security benefits, such as housing benefits, which are currently subject to organised crime.