Osborne to cut welfare budget by further £10bn

The Government will press ahead with plans to cut £10 billion from the welfare budget by 2016-17 on top of the £18 billion cuts already under way, Chancellor George Osborne has announced.

Osborne has secured the agreement of Work and Pensions Secretary Iain Duncan Smith, something he said would be necessary in order to avoid additional cuts in other Whitehall departments.

Duncan Smith is understood to have initially resisted the cuts arguing that savings should be found by means-testing benefits such as free bus passes and winter fuel payments for wealthy pensioners. However, in a joint article he and Osborne said they have reached agreement that the savings can be found without touching the universal benefits for pensioners.

“We are both satisfied that this is possible and we will work together to find savings of this scale,” they wrote, rejecting the alternative options of cuts to economically-productive spending, higher taxes, or more borrowing and debt.

The announcement, made in Osborne’s speech to the Conservative Party conference in Birmingham, will set the Tories on collision with their Liberal Democrat coalition partners.

 Nick Clegg told his party’s conference last month that he would not allow “wild suggestions” of a £10 billion cut in welfare,while Chief Secretary to the Treasury Danny Alexander said, “We simply will not allow the books to be balanced in a way that hits the poorest hardest.”

 Osborne said £16 billion of savings must be found in 2015/16 to meet his target of balancing the books within five years, and he made clear that sums of this magnitude cannot be found simply by increasing taxes on the rich.

 Both Osborne and Cameron indicated yesterday that the rich will be expected to “pay their fair share” towards deficit reduction, but ruled out a “wealth tax” favoured by the Lib Dems.

Osborne argued that while the Government shouldn’t attempt to balance the budget on the backs of the poorest it is an “economic delusion” to think it can be balanced on the wallets of the richest. Among the payouts that instead look set to be targeted is housing benefit for the under-25s, whom David Cameron previously said should live with their parents if they cannot fund their own home.

Osborne and Duncan Smith also confirmed their commitment to the flagship Universal Credit, which is intended to simplify the welfare system by replacing a raft of different benefits, but has been subjected to growing scepticism about whether it can be delivered as planned.

“We are united in our determination to deliver Universal Credit, the most fundamental reform of our benefits system for a generation, on time and on budget.” 

Zanib Asghar