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A CONSUMER&#39S VIEW

The year has ended on a sour note for Tony Blair and his team. The almost universal dismay with which the proposals for the new Individual Savings Account were greeted has been followed by almost universal disquiet over the cutbacks in benefits to single parents.

It isn&#39t going to be a very merry Christmas for the 1.2 million parents bringing up children on their own.

It is obvious that the Government has to reduce the rapidly escalating costs in terms of lost revenue on items such as pensions, Peps and Tessas.

It must also cut the similarly escalating costs of state social security benefits.

But how is removing £6.05 a week from lone parents&#39 child benefit going to coerce them back to work?

After June next year, the average single parent will be around £10.25 a week worse off, according to One-Parent Families, because of the loss of child benefit lone-parent supplement and similar supplments on income support, housing benefit and council tax benefit.

Many single parents would dearly love to work but the real disincentive is the lack of affordable childcare facilities and lack of job skills – not to mention jobs.

And why penalise single mothers and not the fathers? The Child Support Agency has powers to impose deduction of earnings orders against feckless fathers who refuse to support their children and is apparently applying them at a rate of 1,000 a week.

But will the CSA increase its assessments on fathers, where appropriate, to reimburse single mothers for their lost state benefits?

If the Government has decided on minimum levels of child support – which it did when the CSA was set up – when it cuts state help it surely ought to insist that the father shoulders more financial responsibility. It does not suddenly cost £10 a week less to survive.

Benefits to lone parents cost less than £10bn a year and mothers arguably carry out a vital job in bringing up the next generation. Only a small minority choose to be single parents – most are divorced, widowed or abandoned by the father of the children.

The real money guzzler is the state retirement pension at a cost of £27bn a year – plus income support, housing benefit and council tax benefit paid to the elderly which accounts for half of the £100bn annual social security budget.

It would make more sense to reduce the cost of the basic state retirement pension by restricting its payment to those over a certain income level and using the savings to boost means-tested payments to lone parents and the poorest pensioners.

What is the rationale behind paying a retired couple nearly £100 a week if they already have an income from personal or occupational pensions above the national average?

Means-testing could be implemented through the tax system, with a pound-for-pound clawback of the basic state pension for those with, say, an income in retirement of £20,000 a year or more.

As for the new Individual Savings Accounts, the proposals can only be viewed as a golden opportunity lost.

As many have pointed out, ISAs, far from being an encouragement for the lower-paid to save, offer benefits (after 2004) only to the higher-rate taxpayer – not even to those who pay basic-rate tax.

Does Tony Blair understand his own proposed legislation?

A charitable view is that he does not because, if he does, the new ISA is a cynical shroud for simply restricting the tax relief available on Peps and Tessas.

If lower-income savers had difficulty understanding Peps and Tessas, what chance is there of them understanding ISAs?

Where are the incentives for non-taxpayers and 20 per cent taxpayers to save – even assuming they can afford to do so?

A tax-free savings vehicle means nothing to those low-income families.

Let us hope that the rest of the Government&#39s proposed legislation, which we will no doubt be debating in 1998, is thought through a little better.

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