8 Sep 2010

No spending review “shock and awe” attack on universal benefits

A Treasury source tells me not to expect any “shock and awe” attack on universal benefits in the spending review on 20 October. Iain Duncan Smith has been in an unlikely alliance with the Liberal Democrats, who openly campaigned in the election for the better off to lose some of their benefit entitlements.

But George Osborne and David Cameron are clearly nervous of slashing back entitlements because they know the potency of David Cameron’s election pledges to protect them (most notably in the second leaders’ debate and on 23 March in a press conference when he attacked Labour “lies” about threatened cuts to the winter fuel allowance, free bus travel and the free television licence). 

As recently as 18 August, Nick Clegg was giving off different signals as he minded the shop in Downing Street, saying that no final decisions have been made on restricting benefits paid out to the better off. It certainly sounds like one decision has been made – do nothing drastic or too eye-catching.

It leaves Iain Duncan Smith having to look for additional massive savings elsewhere in his budget, which could mean a closer look at housing benefit, pension contributions and retirement ages, benefit thresholds, but all circumscribed by the progressivity chart that appeared in they emergency budget Red Book and which must turn up in future budget books too.

This is supposed to show that the least well-off should not be taking more of a hit than the better off. Difficult bordering on impossible, you might think, given the target 80:20 ratio of cuts to taxes.

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