It does seem terribly pointless - keeping children in care would cost rather more than giving the family benefits wouldn't it?
I'm hoping though, that it's one of those headline grabbing "get tough" measures which won't actually mean much in practice.
I also dislike Blunkett's policies, but in his (partial) defence, why wasn't the plan to lt lots more legal migrant workers in (thus, hopefully, stopping lots of people from falling into the hands of people smugglers) given so much attention?