Andrew Grice: Will the Coalition fare any better with welfare?

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The Independent Online

When George Osborne gets up in the morning, he wonders what he can do to make winning an overall Conservative majority in 2015 more likely. When Steve Hilton gets up, he wonders what he can do to entrench permanent change in Britain now – just in case David Cameron doesn't get a second term.

So they say in Downing Street. Mr Hilton is Mr Cameron's strategy guru, on a mission to transform government through introducing transparency and devolving power. The Chancellor is also the Tories' election strategist, a man on a mission to win the majority he failed to deliver last year.

The two men collided spectacularly over the sweeping changes to the National Health Service proposed by Andrew Lansley, the Health Secretary. For Mr Hilton, they were a crucial plank in the Government's reform agenda. For Mr Osborne, they would undo Mr Cameron's painstaking work to decontaminate the Tory brand by winning the voters' trust on health. Mr Hilton was outgunned because Mr Osborne had the support of the Liberal Democrats, who could have defeated the Health and Social Care Bill in the Commons or the Lords. He found himself fighting not to preserve Mr Lansley's original proposals but to prevent the Bill being ditched completely.

That was under consideration last month. Mr Clegg grabbed good headlines for the diluted NHS reforms announced this week. But Number 10 insiders claim Mr Osborne, operating beneath the media radar, was more influential in ensuring the Bill was filleted. Not for the first time, Mr Cameron's heart was with Mr Hilton but his head told him to back Mr Osborne. His head won.

There has been speculation in the wake of the NHS debate that Mr Hilton might flounce out of Downing Street. Although it can't be entirely ruled out because he is a volatile character, colleagues do not expect him to.

The big question is where the retreat on the NHS leaves the rest of the ambitious reform programme set out by the Coalition last year. The litmus test will be whether the Government sticks to Iain Duncan Smith's big shake-up of the welfare system, which is bound to provoke controversy as individual measures sink in.

True, there is much more public support for "cracking down" on welfare claimants than tinkering with the NHS. However, you cannot lop £18bn off the welfare budget without creating losers. Liberal Democrats are already jittery about some proposed cuts. But this time they may win less support from Mr Osborne, who is also in charge of the most ambitious policy of all; he needs the welfare savings to reduce the deficit. As the Chancellor's display of quiet ruthlessness over the NHS showed, any obstacles to a Tory victory in 2015 will be removed.