Britain will stop paying child benefits to higher earners as part of its plans to slash the budget deficit, which will involve harsh spending cuts across the spectrum, finance minister George Osborne said today.
The move will save £1 billion sterling a year from 2013 - small change compared with a forecast borrowing requirement of around £150 billion this year.
But politically it is a high-stakes move for Britain's coalition government and suggests a determination to do whatever it takes to cut debt despite warnings from the opposition Labour party that acting too fast will choke off a fragile economic recovery.
'We are going to withdraw child benefit from higher rate taxpayers. It's a big decision for us, but we think it's absolutely necessary and fair given the financial situation we face,' Osborne told BBC News.
The plan to withdraw the child allowance by 2013 from families earning more than £44,000 a year breaks with a longstanding British principle of 'universal benefits' - allowances such as child benefit and free bus passes for the elderly that are paid to all, regardless of income.
Osborne is due to unveil plans on October 20 to slash ministries' budgets by around a quarter over five years to curb a record peacetime budget deficit.
The UK coalition wants to transform the welfare payments system so that those in work are always better off than people who are on benefits. This will be achieved by replacing a range of benefits with a single credit.
Osborne's defence of his austerity drive, which has won the backing of credit rating agencies and financial markets, comes amid growing fears of a global economic slowdown and with the opposition Labour Party ahead in opinion polls for the first time in three years.
