It's actually quite normal for a cat scratch to turn red like that. Although alcohol might hurt a little, it's better than peroxide to use on a wound. Besides killing the infection, peroxide also damages the tissue around the wound and it will take longer to heal.
Plain old soap and water and anti-biotic ointment or cream is the best bet for something like that.

I hope it doesn't put him off holding the cat in the future.

It may not be the latex in the bandaid but rather the adhesive. I know I am not allergic to latex, but bandaid adhesive makes my skin all red as well.