Osborne's Bombshell

Osborne's Bombshell: Chancellor declares war on middle-class welfare

Big cuts in the £170bn-a-year social security budget will be sought by the Government as it launches a fundamental review of all public spending to reduce Britain's £156bn deficit.

Universal handouts such as child benefit could be means-tested for the first time and halted for the middle classes and the rich. The review is expected to consider the level and scope of benefits for the jobless, sick and disabled – including the option of freezing them temporarily.

Such moves would be highly controversial and would call into question the Liberal-Conservative coalition's promises to protect the poor and most vulnerable in society, and could anger many people who voted Liberal Democrat in last month's election.

Ministers hinted that pensioners would keep their winter fuel payments, free bus passes and TV licences. But, in another blow to middle-income families, Gordon Brown's £23.6bn flagship tax credits scheme will be pared back.

Benefits, tax credits and the generous pensions paid to public service workers were the three areas targeted for cuts in a Treasury document published yesterday giving the first clues as to where the axe could fall. George Osborne, the Chancellor, warned the Cabinet yesterday that departments other than health and international development whose budgets are not ring-fenced could be reduced by up to 20 per cent.

To give cabinet ministers an incentive to provide "more for less", he said those who settled their budgets quickly with a new "star chamber" of senior ministers could join the group and sit in judgement on colleagues who were dragging their feet.

Mr Osborne will chair the star chamber. Its deputy will be Danny Alexander, the Liberal Democrat Chief Treasury Secretary. Other members will include the Foreign Secretary William Hague and the Cabinet Office ministers Francis Maude and Oliver Letwin. The group will end Labour's policy of treating social security payments as "demand-led". It will look at issues that affect several departments such as public-sector pay, local government and strategic decisions such as reform of the welfare state.



Video: Thatcher returns to Number 10

A "brains trust" of civil servants and outside experts will draw up innovative ideas to cut public spending. Labour's targets will be replaced by business plans for all Whitehall departments, who will have to ask whether all their functions are essential, whether they could be targeted to those most in need or whether they could be provided by the private sector, voluntary groups or citizens themselves.

Mr Osborne, who refused to rule out means-testing child benefit, said: "This is the great national challenge of our generation: after years of waste, debt and irresponsibility, to get Britain to live within its means.

"We didn't choose the terrible economic situation we inherited. But we can work to put it right, to set our country on a brighter economic course, and show that we are all in this together."

The Chancellor was silent on tax rises yesterday but intends that they will meet about 20 per cent of his deficit reduction plan, with 80 per cent coming from spending cuts.

Some tax increases and the size of the public spending cake for the next four years will be announced in the Budget on 22 June. The public will be consulted before ministers decide how the cake should be shared out in the autumn.

Mr Osborne said: "We are genuinely seeking to engage as many people as possible, the brightest civil servants, the best people from the devolved administrations, the best people from pressure groups, think tanks and the frontline public services."

But the SDLP's Mark Durkan mocked the Government's efforts to "popularise" its cuts agenda, asking: "How is this 'axe-factor' approach to government going to play out?"

Frank Dobson, a former Labour health secretary, claimed the coalition was "positively drooling at the prospect of slashing public services".



Video: Unions and public join cuts debate

Mr Darling, the shadow Chancellor, said: "The reason our economy is growing and were prepared to take action to save our economy going into recession – and every one of those measures was opposed by him [Mr Osborne] when he was shadow Chancellor."

In the line of fire

Social security benefits: £170bn

By far the largest area of government spending, and forecast to go above £200bn in 2010. Around £85bn goes to those out of work, although some of that includes tax credits. Around 3.2 million working-age households claim housing benefits. Almost 2.5 million people have claimed income support or incapacity benefits for more than two years.

Tax credits: £23.6bn

It is thought the amount lost in the tax system amounts to £1.7bn. Child tax credits or working tax credits can be claimed by people employed or self-employed and work at least 16 hours a week. A £4-a-week rise was due to come into effect in 2012.

Public-sector pensions: £4.4bn

Regarded as a time bomb. The National Audit Office has revealed that unfunded public-sector schemes would be paying out £79bn by 2060, compared with £25bn in 2010. The huge rise comes as a result of the real earnings of public-sector workers, who are also living longer.

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 year of political gossip, levity and intrigue from the sharpest pen in Westminster
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

Recruitment Genius: Software Tester

£20000 - £30000 per annum: Recruitment Genius: A Software Tester is required t...

Recruitment Genius: Senior Developer

Negotiable: Recruitment Genius: The Company sells mobile video advertising sol...

Recruitment Genius: Digital Marketing Executive

£16000 - £20000 per annum: Recruitment Genius: We have a vacancy within our ra...

Ashdown Group: IT Support Analyst - 1st Line Helpdesk - West London - £25,000

£18000 - £25000 per annum: Ashdown Group: IT Support Analyst - 1st Line Helpde...

Day In a Page

Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

Celebrities call on David Cameron to take more Syrian refugees

One young mother tells of torture by Assad regime
The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

The enemy within

People who hear voices in their heads are being encouraged to talk back
'In Auschwitz you got used to anything'

'In Auschwitz you got used to anything'

Survivors of the Nazi concentration camp remember its horror, 70 years on
Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

Autumn/winter menswear 2015

The uniforms that make up modern life come to the fore
'I'm gay, and plan to fight military homophobia'

'I'm gay, and plan to fight military homophobia'

Army general planning to come out
Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

What the six wise men told Tony Blair

Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

25 years of The Independent on Sunday

The stories, the writers and the changes over the last quarter of a century
Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

Homeless Veterans appeal

As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

Smash hit go under the hammer

It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

The geeks who rocked the world

A new documentary looks back at origins of the computer-games industry
Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

Belle & Sebastian is taking a new direction

Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea
America: Land of the free, home of the political dynasty

America: Land of the free, home of the political dynasty

These days in the US things are pretty much stuck where they are, both in politics and society at large, says Rupert Cornwell
A graphic history of US civil rights – in comic book form

A graphic history of US civil rights – in comic book form

A veteran of the Fifties campaigns is inspiring a new generation of activists
Winston Churchill: the enigma of a British hero

Winston Churchill: the enigma of a British hero

A C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
Growing mussels: Precious freshwater shellfish are thriving in a unique green project

Growing mussels

Precious freshwater shellfish are thriving in a unique green project