Cameron hints at child benefit reform

David Cameron has delivered his strongest hint yet that "middle class" benefits could be squeezed in order to fund a major overhaul of the welfare state.

The Prime Minister fuelled speculation that child benefit could be means-tested by suggesting some universal payouts were no longer "affordable".

As the Tory conference kicked off in Birmingham, it was confirmed that a deal had been struck between Work and Pensions Secretary Iain Duncan Smith and Chancellor George Osborne over root-and-branch reform.

The two men had clashed repeatedly over how to fund amalgamating dozens of benefits into a "Universal Credit", with the heavy up-front costs causing alarm in the Treasury as the coalition struggled to slash budgets.

Speaking on the BBC's Andrew Marr Show, Mr Cameron praised the "refreshingly radical" plan and said the price tag was being reduced by introducing the changes "progressively" over two parliaments.

The premier denied there would be "losers" from the reforms, but also stressed it would be impossible to tackle the deficit without "making savings in the welfare budget" - which accounts for one pound of every three it spends.

Although he refused to give details of where cuts would fall ahead of the Comprehensive Spending Review on October 20, Mr Cameron said: "On the one hand we have got to ask, are there some areas of universal benefits that are no longer affordable?

"But on the other hand let us look at the issue of dependency where we have trapped people in poverty through the extent of welfare that they have."

He went on: "I think it is very important that there are universal benefits. We pay into this system, that is why I want a really good state pension system. We are the first government in a long time to link the pension back to earnings."

Mr Cameron's refusal explicitly to back any universal payouts apart from the state pension will heighten speculation over the fate of child benefit.

It has been estimated that stopping the payments when children reach the age of 16 rather than the current limit of 19 would save £2 billion a year.