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Budget 2010: welfare benefits cut

By Channel 4 News

Updated on 22 June 2010

Chancellor of the Exchequer George Osborne introduces a raft of cuts to welfare spending in yesterday's emergency budget, including the capping of housing allowances and freezing of child benefits, in a bid to save £11bn over the next four years.

budget 2010: George Osborne introduces a raft of cuts to welfare spending, including measure to cap housing and child benefits

Government handouts have soared by £60bn in the last ten years, with total welfare spending now standing at £192bn.

George Osborne said in his budget speech that the explosion in costs is "one reason why there is no money left", and announced plans to make cuts worth £11bn by 2014/15.

"We are wasting the talent of millions, and spending billons on it in the process," said Mr Osborne. "So we will increase the incentives to work, and reduce the incentives to stay out of work."

He said from now on all benefits, except state pensions and pension credits, will rise in line with consumer prices, rather than retail prices, to reflect every day prices better. This will haul in savings of £6bn a year.

Mr Osborne said spending on tax credits has jumped from £18bn in 2003, to an "unsustainable" £30bn this year.

Families pocketing earnings of up to £83,000 are eligible for means tested benefits under the current system, he said, adding: "The country can simply not afford this".

Child benefits
Child benefits will be frozen for the next three years and will be removed from families earning more than £40,000.

However, freezing child benefits will hurt the poorest families first, rather than their richest peers, Save the Children said.

Sally Copley, from the charity, also said: "Most, importantly, a 20 per cent VAT rate means the poorest parents will see their VAT bill rise to at least £1,600 a year - affecting already overstretched budgets - and driving some into the arms of loan sharks."

The £190 Health in Pregnancy Grant, a one-off tax-free payment for pregrant women, will be abolished from April 2011. The Sure Start Maternity Grant will be given to the first child only.

"And we will expect lone parents to look for work when their youngest child goes to school," Mr Osborne said.

Tax credits
The threshold for tax credit eligibility will be dropped from £50,000 to a new level of £40,000 from April 2011.

Housing allowances
Housing benefits will be capped at a maximum of £280 a week for a one-bedroom property to £400 a week for a four-bedroom or larger home.

New and existing Disability Living Allowance claimants will be subjected to new medical assessments from 2013.

Spending on housing benefits has risen from £14bn ten years ago to £21bn today - that is close to 50 per cent increase over and above inflation. Some families receive as much as £104,000 a year in housing benefit.

"We now spend more on housing benefit that we do on the police and on universities combined," said Osborne.

The government will restore the link between earnings and basic state pensions from April 2011, and plans to move towards raising the state pension age to 66. 

Pensions will be guaranteed to rise in line with earnings, prices or 2.5 per cent - whichever rate is greatest, Mr Osborne said today.

Pensioner David Gower, 75, 'dreads' cutbacks
"I am very worried and deeply concerned that Social Services might face spending cuts of 25 percent. I am a severely disabled pensioner, with hardly any mobility, who relies on carers four times a day.
I feel it is most unfair that I might end up being punished with less time for my care or penalised for extra cash that I haven't got.
The bankers were originally given an open cheque and, as far as I can see, little has been done to redress this. Whereas, people like me may well have to pay the price.
My local authority has already pared down my home care service as much as it can. For instance, carers are already hard pushed to get me out bed, washed, toileted, dressed and breakfasted, with the bed made, in the allotted 45 minutes time.
I would dread a further reduction in time or them having to sort my lunch out in 10 instead of 20 minutes. Any further cutbacks will have a detrimental effect on my wellbeing and physical mobility.

'Tough but fair'
Mr Osborne said the measures were "tough but fair", pointing to examples set by European neighbours in tackling public debt.

"Germany has already announced 30bn euros worth of cuts to welfare spending," he said.

He also outlined the much-touted tax sweetener for lower income earners, with plans to raise personal allowances for basic rate tax payers by £1,000 to £7,475 from next April - exempting some 880,000 Britons from income tax altogether.

Acting Labour leader Harriet Harman said that Mr Osborne's plans were "reckless", hitting those least able to pay.

"This is a Tory budget that will throw people out of work, that will hold back economic growth and will harm vital public services," she said.

"What this country needed was a budget to support economic growth, protect jobs and cut the deficit fairly. What we got was a reckless budget that pulls the rug out from under the economy," Ms Harman added.

Figured it out yet? The budget in numbers
149000000000 pounds - public sector net borrowing forecast this year.
20000000000 pounds - amount expected to be raised every year from the new bank levy
7475 pounds - personal allowance for basic rate tax payers from next April
85 times the chancellor banged the dispatch box during his speech
66 retirement age the government plans to introduce for everyone
55 minutes George Osborne took to deliver his budget
3 years child benefit will remain frozen
3 sips of water drunk by George Osborne during his budget speech
1 opportunity the Chancellor can use the old red budget box before it is retired
0 rise in duty on alcohol, tobacco and fuel

More key numbers from the budget here

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