Chancellor George Osborne keeps an eye on the election as he decides not to cap state pensions

Chancellor announces sweeping cuts to benefits bill

George Osborne tried to wrongfoot Labour as he announced that the basic state pension would not be included in a new cap on more than half  the £220bn-a-year welfare budget.

In a government-wide spending review that was more about politics than economics, the Chancellor announced that housing benefit, tax credits, disability benefits and other pensioner benefits, totalling £112bn a year, would be covered by a new ceiling from April 2015.  But the basic state pension, which would be included in a similar cap planned by Labour, would not be affected by the Conservatives' plans. Under them, the independent Office for Budget Responsibility would issue a public warning if the Government were likely to exceed the welfare cap, forcing the Chancellor to make cuts or explain himself to Parliament.

With an eye on the 2015 general election, Mr Osborne challenged Labour, which he dubbed "the welfare party," to say whether it would reduce pensions.  He said Labour's proposed cap "would mean that a future government could offset a rise in working-age benefits by cutting the pensions of older people."

Ed Balls, the shadow Chancellor,  side-stepped the trap, insisting that Labour was committed to the "triple lock" under which the state pension rises annually by earnings, inflation or 2.5 per cent, whichever is highest. Instead, Labour might raise the age at which people qualify for the state pension.

Mr Osborne opened the door to curbs on pensioners' perks by announcing that the winter fuel allowance will be withdrawn in autumn 2015 from 100,000 pensioners living in France, Portugal, Spain, Greece, Gibraltar, Malta and Cyprus, where the temperature is warmer than the South West of England. It will save £30m  a year.

Unveiling £11.5bn of cuts for 2015-16, the Chancellor admitted that balancing the nation's books meant "difficult decisions," saying: "There never was an easy way to bring spending under control."

Today (thurs) the Government will announce how it will spend £100bn on road, rail, energy and housing projects.  The infrastructure plans will include more affordable housing for low income groups, funded partly by lower than expected rents for council and housing association tenants, which will save £540m in housing benefit by 2017-18.

Mr Osborne said £5bn of the £11.5bn cuts would be achieved by efficiency savings.  Some 144,000 public sector jobs will be lost in 2015-16 and automatic annual pay rises ended in the NHS, schools, the police and prisons-- but not the armed forces.

The Chancellor found some good news to announce, extending  the freeze in most council tax bills for another two years.  But local authorities were among yesterday's biggest losers, seeing their government grants cut by a further 10 per cent. Spending on health, schools and overseas aid was again protected. Parts of health and social care budgets will be merged, with more than £3bn spent on services for older people jointly commissioned by NHS and local authorities by 2015-16.

Analysts warned that deeper cuts and some tax rises would be needed after the May 2015 election, no matter who is in power. Paul Johnson, director of  the Institute for Fiscal Studies, said that on current plans, by 2017-18, government spending would be a third less than in 2010.  "If I was a betting man, I would think there would be some kind of tax rises after the election," he said.

During angry Commons clashes,  Ed Balls, the shadow Chancellor,  told Mr Osborne his statement meant more cuts to the police, defence budgets and local services."You have failed on living standards, growth and the deficit. And families and businesses are paying the price for your failure," he said. "You said we were all in this together but then you gave a huge tax cut to millionaires. You promised to balance the books but that promise is in tatters," he said.

He challenged Mr Osborne to take "bold action" now to protect public services rather than promise infrastructure spending in five or seven years' time. "Instead of action to boost growth and long-term investment all we got today is more of the same from a failing Chancellor," he said.

Liberal Democrat ministers insisted they had fought their corner on issues such as the Business Vince Cable's pro-growth measures and secured the boost to capital spending.

But Prateek Buch,  director of the Social Liberal Forum, said: "Britain needs a more effective economic approach beyond hoping that cutting government spending will heal the economy….The additional cuts to local government, transport and public sector pay will squeeze already-strained public services, making a mockery of the localism agenda and adding more pressure on the cost of living. Such decisions are the painful consequence of prioritising a balanced budget over a balanced economy and society."

Arts and Entertainment
Gregg Wallace in Summer's Supermarket Secrets
tv All of this year's 15 contestants have now been named
Sport
The giant banner displayed by Legia Warsaw supporters last night
football Polish side was ejected from Champions League
Arts and Entertainment
Could we see Iain back in the Bake Off tent next week?
tv Contestant teased Newsnight viewers on potential reappearance
News
i100(and it's got nothing to do with the Great British Bake Off)
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
News
news It's not just the world that's a mess at the moment...
News
Angelina Jolie with her father Jon Voight
peopleAsked whether he was upset not to be invited, he responded by saying he was busy with the Emmy Awards
News
Bill Kerr has died aged 92
peopleBill Kerr appeared in Hancock’s Half Hour and later worked alongside Spike Milligan and Peter Sellers
Life and Style
A picture taken on January 12, 2011 shows sex shops at the Paris district of Pigalle.
news
Sport
footballPremiership preview: All the talking points ahead of this weekend's matches
News
Keira Knightley poses topless for a special September The Photographer's issue of Interview Magazine, out now
people
Voices
The Ukip leader has consistently refused to be drawn on where he would mount an attempt to secure a parliamentary seat
voicesNigel Farage: Those who predicted we would lose momentum heading into the 2015 election are going to have to think again
Arts and Entertainment
Cara Delevingne made her acting debut in Anna Karenina in 2012
film Cara Delevingne 'in talks' to star in Zoolander sequel
News
i100
Sport
Mario Balotelli pictured in his Liverpool shirt for the first time
football
Life and Style
tech
Independent
Travel Shop
the manor
Up to 70% off luxury travel
on city breaks Find out more
santorini
Up to 70% off luxury travel
on chic beach resorts Find out more
sardina foodie
Up to 70% off luxury travel
on country retreats Find out more
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Java Developer - 1 year contract

£350 - £400 Per Day: Clearwater People Solutions Ltd: Our client based in Cent...

Junior Analyst - Graduate - 6 Month fixed term contract

£17000 - £20000 Per Annum Bonus, Life Insurance + Other Benefits: Clearwater P...

SAS Business Analyst - Credit Risk - Retail Banking

£450 - £500 per day: Orgtel: SAS Business Analyst, London, Banking, Credit Ris...

Project Manager - Pensions

£32000 - £38000 Per Annum Bonus, Life Insurance + Other Benefits: Clearwater P...

Day In a Page

Ukraine crisis: The phoney war is over as Russian troops and armour pour across the border

The phoney war is over

Russian troops and armour pour into Ukraine
Potatoes could be off the menu as crop pests threaten UK

Potatoes could be off the menu as crop pests threaten UK

The world’s entire food system is under attack - and Britain is most at risk, according to a new study
Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

Seoul's plastic surgery industry is booming thanks to the popularity of the K-Pop look
From Mozart to Orson Welles: Creative geniuses who peaked too soon

Creative geniuses who peaked too soon

After the death of Sandy Wilson, 90, who wrote his only hit musical in his twenties, John Walsh wonders what it's like to peak too soon and go on to live a life more ordinary
Caught in the crossfire of a cyber Cold War

Caught in the crossfire of a cyber Cold War

Fears are mounting that Vladimir Putin has instructed hackers to target banks like JP Morgan
Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years

Salomé: A head for seduction

Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years. Now audiences can meet the Biblical femme fatale in two new stage and screen projects
From Bram Stoker to Stanley Kubrick, the British Library's latest exhibition celebrates all things Gothic

British Library celebrates all things Gothic

Forthcoming exhibition Terror and Wonder: The Gothic Imagination will be the UK's largest ever celebration of Gothic literature
The Hard Rock Café's owners are embroiled in a bitter legal dispute - but is the restaurant chain worth fighting for?

Is the Hard Rock Café worth fighting for?

The restaurant chain's owners are currently embroiled in a bitter legal dispute
Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival

In search of Caribbean soul food

Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival
11 best face powders

11 best face powders

Sweep away shiny skin with our pick of the best pressed and loose powder bases
England vs Norway: Roy Hodgson's hands tied by exploding top flight

Roy Hodgson's hands tied by exploding top flight

Lack of Englishmen at leading Premier League clubs leaves manager hamstrung
Angel Di Maria and Cristiano Ronaldo: A tale of two Manchester United No 7s

Di Maria and Ronaldo: A tale of two Manchester United No 7s

They both inherited the iconic shirt at Old Trafford, but the £59.7m new boy is joining a club in a very different state
Israel-Gaza conflict: No victory for Israel despite weeks of death and devastation

Robert Fisk: No victory for Israel despite weeks of devastation

Palestinians have won: they are still in Gaza, and Hamas is still there
Mary Beard writes character reference for Twitter troll who called her a 'slut'

Unlikely friends: Mary Beard and the troll who called her a ‘filthy old slut’

The Cambridge University classicist even wrote the student a character reference
America’s new apartheid: Prosperous white districts are choosing to break away from black cities and go it alone

America’s new apartheid

Prosperous white districts are choosing to break away from black cities and go it alone