Many years ago I heard Frank Field MP speak, and one of the themes of his speech was the evil of means testing for benefits. His view was that this created benefits traps, with huge marginal rates of tax if people tried to improve their situation, and discouraged thrift. In fact means tested benefits as they operate today mean that it makes economic sense for the poor to stay poor, because increases in income or the accumulation of assets are punished by the withdrawal of means-tested benefits. Unfortunately, Labour under Brown are obsessed with means testing, which is one reason social mobility has decreased under the current government. Despite this, Gordon Brown's latest brainwave is to replace the current system of tax relief for childcare vouchers with, you guessed it, means testing. The argument is that too many people who can afford to pay for childcare are benefitting from tax relief. So, a system that works well is to be replaced by one that gives people an incentive to stay poor. That is even if they take up the benefit at all, becaue means-tested benefits have a much worse take-up rate than universal benefits.
Of course, there is also a political dimension because with an election coming up quite a few Labour MPs have worked out that withrawing childcare tax relief won't be, well, popular. There is already a large online petition against the move and dozens of Labour MPs have stated their oppositon to Brown's policy. These do not include one of our local MPs though. Angela Smith has been in the local papers telling us what a good idea it all is. She is Brown's PPS after all, so not much choice there.
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