Happy New Year from the Chancellor: George Osborne targets working-age poor again as he insists Britain must make £25bn more welfare cuts in 2014

Half the cuts to come from the welfare budget

Political Editor

George Osborne was accused of targeting the poor and vulnerable and sparing the rich as he outlined £25bn of new spending cuts, with half of them coming from the welfare budget.

The Chancellor kicked off the political year with a bleak warning that the job of clearing the deficit is “not even half done.” But his suggestion of £12bn of welfare cuts in the two years after the 2015 election provoked an angry backlash from the Liberal Democrats and pressure groups.

Nick Clegg, the Deputy Prime Minister, accused  Mr Osborne of launching an “unrealistic, unfair” attack on the poor while demanding no sacrifices from the wealthy. He told his monthly press conference: "You've got a Conservative Party now who are driven, it seems to me, by two very clear ideological impulses. One is to remorselessly pare back the state – for ideological reasons. Secondly – and I think they are making a monumental mistake in doing so – they say the only section in society which will bear the burden of further fiscal consolidation are the working-age poor.”

Mr Clegg added: “You've got an agenda on the right which appears to believe in cuts for cuts' sake, and an agenda on the left which believes in spending for spending's sake.”

Andy McSmith's Diary: More than a little teed off with the Chancellor’s speech  

His hostile reaction suggested that it might prove difficult for the Conservatives and Lib Dems to reach agreement on a second coalition if the 2015 election results in another hung parliament. Both Labour and the Lib Dems called yesterday for the deficit to be cut in a “fair way”.

Mr Osborne has set his face against any tax rises to balance the books, while the Lib Dems and Labour both support a mansion tax on homes worth more than £2m. Mr Clegg made clear he would support further tax increases on the rich, to fill 20 or 25 per cent of the gap, with the rest found through cuts.

The Chancellor’s tough message, in a speech in Birmingham and media interviews, was designed to put Labour on the spot in the run-up to the election. If Labour refuses to back big welfare cuts, the Tories will argue that it lacks economic credibility and would raise taxes. Mr Osborne believes further welfare savings will prove popular with many swing voters.

The Chancellor said the Government had to look at the “enormous welfare budget” because “substantial savings” could be found. He added: “I would look at housing benefit for the under-25s when there are many people… who can’t afford to move out of their home but if you’re on benefits you can get housing benefit under the age of 25; there are people, for example, on incomes of £60,000 or £70,000 living in council homes – I’d look at that.”

Mr Osborne said government, and the welfare system, were “going to have to be permanently smaller.” But he appeared to rule out cuts to the health budget or pensioners’ benefits such as winter fuel allowances, free bus passes and TV licences.

Paul Johnson, director of the Institute for Fiscal Studies, said: “Wherever you look, you are taking money either from people who are poor, from people who are sick and disabled or people with children, none of which looks terribly easy to achieve, but these are difficult times.”

Alison Worsley, deputy director of strategy at Barnardo’s, said: “Any proposal to remove housing benefits from all under-25s risks leaving some of this country’s most vulnerable people stranded. We must not forget that many disadvantaged young people starting out in the world simply do not have a family that they can turn to for help.”

Fiona Weir, chief executive of Gingerbread, which represents single parents, said: “Almost half of under-25s supported by housing benefit are single parent families with young children,  for whom moving in with mum and dad simply isn’t an option.”

Ed Balls, the shadow Chancellor, said: “Labour will have to make cuts and in 2015-16 there will be no more borrowing for day-to-day spending… But we will get the deficit down in a fair way, not give tax cuts to millionaires. And we know that the way to mitigate the scale of the cuts needed is to earn and grow our way to higher living standards for all."

A Conservative spokesman replied: “Ed Balls has confirmed that Labour’s choice is for more of the same – more borrowing, more spending on welfare and more taxes. That would mean a less financially secure future for hardworking people and their families.”

Where the spending cuts could fall

Where could the Conservatives find the £25bn of public spending cuts in the first two years after the 2015 election proposed by George Osborne?

Experts agree that it would not be easy, not least because some big areas of spending  would be protected by a Tory administration – including the £108bn-a-year health budget and the basic state pension, which soaks up £75bn of the £180bn  spent on benefits each year. The bill for the state pension is set to rise by £45bn between now and 2025 after the three main parties committed themselves to the “triple lock” – under which it will rise annually by earnings, prices or 2.5 per cent, whichever is higher.

Welfare, including tax credits to top-up the earnings of people on low incomes, accounts for more than £200bn of the £720bn total public spending. So it was no surprise that the Chancellor said about £12bn of his £25bn of post-election cuts would come from welfare.

But the two areas he mentioned, cutting housing benefit for the under-25s and denying people earning £60,000-£70,000 the right to a council house, would save only about £2bn at best.

That would put other “working age” benefits at risk – including those for the sick and disabled; tax credits  and child benefit. But these have all been targeted once and further cuts would be very controversial. One leading option is to restrict child benefit, and possibly other payments, to two children per family, although that would probably apply only to new claims and so the savings would accrue gradually.

The ring-fencing of the health, pensions, schools and science budgets would put enormous  pressure on the departments that have already taken the biggest hits in the current parliament – the Home Office (including the police) the Ministry of Justice (legal aid) the Department for Business (universities) and local government. The already-stretched Ministry of Defence would also be in the frame, a move which could provoke a revolt among Tory MPs.

 

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA special investigation by Andy McSmith
2015 General Election
May2015

Poll of Polls

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

Tradewind Recruitment: French & German Teacher

£120 - £145 per day: Tradewind Recruitment: French & German Teacher X2 Materni...

Recruitment Genius: IT Support Engineer / Systems Administrator

£25000 - £32500 per annum: Recruitment Genius: Based in SW London, this compan...

Recruitment Genius: Project Coordinator

Negotiable: Recruitment Genius: Due to expansion this leading designer and sup...

Recruitment Genius: Recruitment Assistant

£19000 - £21000 per annum: Recruitment Genius: Are you a friendly, confident i...

Day In a Page

Isis hostage crisis: The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power

Isis hostage crisis

The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power, says Robert Fisk
Missing salvage expert who found $50m of sunken treasure before disappearing, tracked down at last

The runaway buccaneers and the ship full of gold

Salvage expert Tommy Thompson found sunken treasure worth millions. Then he vanished... until now
Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Maverick artist Grayson Perry backs our campaign
Assisted Dying Bill: I want to be able to decide about my own death - I want to have control of my life

Assisted Dying Bill: 'I want control of my life'

This week the Assisted Dying Bill is debated in the Lords. Virginia Ironside, who has already made plans for her own self-deliverance, argues that it's time we allowed people a humane, compassionate death
Move over, kale - cabbage is the new rising star

Cabbage is king again

Sophie Morris banishes thoughts of soggy school dinners and turns over a new leaf
11 best winter skin treats

Give your moisturiser a helping hand: 11 best winter skin treats

Get an extra boost of nourishment from one of these hard-working products
Paul Scholes column: The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him

Paul Scholes column

The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him
Frank Warren column: No cigar, but pots of money: here come the Cubans

Frank Warren's Ringside

No cigar, but pots of money: here come the Cubans
Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee