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Which sacred cow will be sacrificed?

Susan Young ponders Labour's plans to improve staying-on rates.

Universal child benefit and education for all are two of the meatiest sacred cows in the welfare state, especially to Labour backbenchers. Daring and sensible though the party's latest idea may be - to raid one to improve the other - major questions remain about funding.

And are Labour's plans to improve the staying-on rate with an "educational allowance" to most 16 and 17-year-olds on full-time courses, paid for by scrapping Youth Training and post-16 child benefit, the best solution?

Major ideological difficulties are likely to surface at next week's Labour conference at the thought of effectively means-testing a universal benefit - Pounds 10.80 a week for first children and Pounds 8.10 for their siblings. A principle is at stake, although affected families would only be those on "higher" incomes with 16 and 17-year-olds still in full-time education, but who would be ineligible for the new allowance.

This is why shadow chancellor Gordon Brown's most repeated mantra is that of the millionaire who sends his offspring to sixth form at Eton being eligible for the benefit, while half the mothers of the age group are not because their children are in full-time education.

Many in his party, want to avoid what they suspect could be the thin end of the wedge which might eventually finish universal child benefit for under-16s, affecting 12 million families.

But one question Mr Brown has refused to answer until after November's budget is at what level those higher earnings would start.

And would the income level chosen as the cut-off point be the mother's (to whom child benefit is currently paid) the highest earner's, or that of the whole family? Although the last option might be the most sensible, it would also be most expensive.

It is on financial details such as these that the success of the package may rest, but with Conservative gloatings about "teenage tax" and ideological debates about where higher income starts thorny even within Labour, it is not a figure the party is in a hurry to establish.

According to the Institute of Fiscal Studies, an independent think-tank, making the cut-off point Pounds 100,000 for the education allowance would probably claw back no more than Pounds 30m, around 5 per cent of the current child benefit budget. To this could be added the Pounds 400m which Youth Training costs for some 280,000 trainees.

This would not provide vast reserves to fund an enhanced allowance for families on the very lowest incomes, currently the ones whose children are likeliest to leave school without qualifications and who are thereafter disadvantaged in terms of jobs, wages and even eligibility for free higher education.

Their participation is essential if Labour is to reach its first target, that of raising the staying-on rate from 70 to 80 per cent.

The Institute of Fiscal Studies has spent the week running its own computer models of ways in which more teenagers could be financially induced to stay on at school. Researcher Lorraine Dearden said the best method would be to pay the allowance directly to the student.

Another possibility was to double the level of child support currently paid to parents claiming income support if they had a 16 to 18-year-old in full-time education.

Ms Dearden said: "It seems to us that if you really want to make some difference you have to spend some money. What we're suggesting is quite a modest scheme. But it is really obvious that the participation rate of kids who come from poorer socio-economic backgrounds is significantly lower than from rich families."

Ruth Lister, professor of social policy and administration at Loughborough University, said she would prefer the education allowance to be paid on top of child benefit as there was often a poor take-up of means-tested benefits.

A muted welcome for the plan comes from Youthaid, the charity which monitors young people in the world of work, training and benefits. Director Balbir Chatrik said many young people left school because their families could not afford them to continue and so extra money could make a difference, depending how much was on offer.

She was unhappy, however, that Labour was apparently making no provision for the thousands of young people - 120,000 at the last count - who had left school and were simply doing nothing until working out their next move.

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