Benefits payday for middle earners

NEW Labour's plan to target state handouts at the poorest sections of society is being undermined by a middle-class benefits bonanza, Financial Mail has learned.

Households earning about £32,500 - nearly one-and-a-half times the national average - are helping themselves to a range of handouts, from child benefit and student support to healthcare and help with housing costs.

On the eve of Chancellor Gordon Brown's three-year Spending Review, due next month, official figures show those in the 'eighth decile' - the third-wealthiest 10% of households - are enjoying a huge welfare windfall.

In the three years from 1998 to 2001, these households boosted their consumption of cash benefits by 23% against a rise of just 5.4% across the whole population. Their consumption of benefits in kind, including health and education, jumped 17% compared with 15% for the country as a whole.

The poorest 10% of the population - earning, on average, £2,076 - took an extra 9.6% in cash benefits and 8.9% in benefits in kind. The findings fly in the face of Brown's Budget pledge to commit himself to a 'new welfare system' that offers 'more help to those who need it most'.

Areas of consumption increases by the middle class include student support (up more than 45% in three years, against a 23.8% fall across the whole population), child benefit (up more than 31%, against 14% nationally), education (a rise of 23.5%, against 11.8% nationally) and the state retirement-pension (up 25.9%, against 4.9% nationally).

Eamonn Butler, director of the free-market think-tank, the Adam Smith Institute, said: 'The middle classes have always been the greatest consumers of a number of benefits and are skilled at ensuring they get what they want.'

He added that those on aboveaverage incomes may well be responding to Brown's 'stealth taxes' and his National Insurance rise, due next April.

Though the share of all cash benefits taken by the poorest tenth rose from 12.8% in 1998 to 13% in 2001, that of the third-highest group rose from 4.6% to 5.4%. While the share of total benefits in kind received by the poorest tenth slipped from 14.7% in 1998 to 13.9% in 2001, that of the third-highest group edged up from 7.8% to 8%.