Chancellor George Osborne announces the coalition is to scrap child benefit for higher rate taxpayers from 2013. Our Political Editor Gary Gibbon says other universal benefits will be looked at too.
Mr Osborne said the child benefit cut will affect people who pay 40 per cent and 50 per cent tax rate.
He said around 15 per cent of families will be affected by the benefit cut, which will save around £1bn a year – claiming this will help protect the National Health Service. He claimed it is a “fair measure”.
Mr Osborne said that scrapping the child tax credit payments will enable to government to pay for wider reforms of the benefits system.
He said in an interview for BBC Breakfast: “When we are asking so much of so many people across society, I think it is a fair measure.”
Benefits will merge into a single universal credit, under a scheme agreed between Works and Pensions Secretary Iain Duncan Smith and the Treasury. This agreement follows a long battle over cuts to the welfare budget which Osborne said would make it “worth going to work” and cut fraud.
“We think this is fair and it means we are all in this together.” George Osborne
Mr Osborne said the upfront costs will be paid for by cuts to child benefit for better-off people.
He added: “We are going to withdraw child benefit from higher-rate taxpayers. It is a big decision for us but we think it is absolutely necessary and fair given the financial situation we face.
“These are going to be families where there is a higher-rate taxpayer – about 15 per cent or so of families – and we are going to say it is very difficult to justify taxing people on much lower incomes in order to pay the child benefit to some of the better off in our society.
“It is not a decision we have taken lightly but given the scale of the debts that Labour’s left us with… we think this is fair and it means we are all in this together.”
Mr Osborne denied he tried to block Mr Duncan Smith’s proposed reforms, claiming, “it’s not that I didn’t like the idea. It is just that my job is to make sure that the public finances are secure.”
He also insisted that the government’s cuts policy will put the country on course for a “steady and sustainable recovery”.
The Work and Pensions Secretary, Iain Duncan Smith told Channel 4 News the move would not be a disincentive to marriage.
“We have to do this, it’s fair and I think it’s quite progressive,” he said. “What we’ve been looking at through all this deficit programme is fairness.”
Osborne's bold measure
It’s a bold measure, writes Channel 4 News Political Editor Gary Gibbon, and it cannot just stand there on its own you might think. Other universal benefits will be looked at as well. I asked one government figure about the anomaly of two couples on £40,000 each still getting child benefit while a one-earner household with a worker on £44,000 loses the lot.
Ah, I was told, when we have the mighty combined tax and benefits database with all the info in one place we’ll be able to deal with that too!
Osborne conference speech
The Chancellor is to address the Conservatives annual conference in Birmingham later, in an upbeat tone about the nation’s economic prospects, while warning that new Labour leader Ed Miliband will put the economy “back on the brink” and force the country into even bigger cuts in the future.
Last week Mr Miliband accused the Tories of being pessimistic, but Mr Osborne is expected to claim the coalition’s approach to the deficit of spending cuts will help Britain’s aspiration and deliver “a better future for all”.
In his keynote speech later, Osborne will say: “The hard economic choices we make are but a means to an end, and that end is prosperity for all.
“Not from the quick fix of another debt bubble or by hitching the country’s entire fortunes again to the City of London, not growth confined to one corner of our country or one sector of our economy, but lasting, sustainable growth that will only come from releasing the aspirations of the whole British people.
“The foundations of a strong economy don’t rest alone on the decisions of ministers or the spending programmes of government. They come from the most basic human instincts of all.
“The aspiration to have a better life, to get a better job, to give your children a better future. The aspiration to work the extra hour, to play a bigger part of your community, to have a bigger say in your country and its future.
“These aspirations are the most powerful forces in our nation and I want them put to work for a better future for us all.”
The Chancellor will use his keynote speech to criticise Ed Miliband by claiming the choice for Britain dealing with the deficit is between the national interests and the “vested interests” of Miliband and trade union bosses “who put him where he is”.
Osborne will say the new Labour leader’s plan for the economy will result in “the return of crippling economic instability, Britain back on the brink”.
“We are not going to allow that to happen to our country again”, he will argue.
Osborne’s comprehensive spending review on 20 October will detail the cuts programme ahead. He will argue that delaying paying off the country’s £109bn deficit will end up costing even more in the future.
He will say: “It’s like with a credit card – the longer you leave it, the worse it gets, you pay more interest, you pay interest on the interest, you pay interest on the interest on the interest.
Delay now means pay more later. Everyone knows it’s the most basic rule of debt. So Labour’s cuts wouldn’t be smaller – they would be bigger and last longer. George Osborne MP
“We are already paying £120 million of interest every single day thanks to the last Labour government. Millions of pounds every day that goes to foreign governments so they can build the schools and hospitals for their own citizens that we aren’t able to afford for ours. How dare Labour call that protecting the poor?
“Delay now means pay more later. Everyone knows it’s the most basic rule of debt. So Labour’s cuts wouldn’t be smaller – they would be bigger and last longer.
“In eight years’ time we would still be meeting here talking about what we would cut. A decade lost to debt. That’s what’s on offer from Labour and my generation won’t stand for it.”
National interest vs ‘vested interests’
The Chancellor will point to support for the coalition’s economic policy over early cuts from the IMF, the OECD, the bond markets, credit rating agencies, Tony Blair and even David Miliband, who was defeated by his brother Ed in last week’s Labour leadership contest.
He will say: “On the other side is Ed Miliband and the trade union leaders who put him where he is.
“The national interest or the vested interests. I know which side we’re on – we will stick to our plan, deal with the debts and get our economy moving again.”
Coalition spending will be focused on areas that support economic growth, Mr Osborne will argue. These, he will say, will include green investment, carbon capture and storage, and the pupil premium in schools, enabling poorer children to have better opportunities.
The national interest or the vested interests. I know which side we’re on – we will stick to our plan, deal with the debts and get our economy moving again. George Osborne MP
He will argue the UK needs to be more competitive, and the coalition will help the country do this by reversing the national insurance increase and cutting corporation tax. He will promote these policies as “only the start”.
London Mayor Boris Johnson is also addressing the conference later, and will do so by launching an angry attack against the trade unions who are holding the latest Tube strikes in the capital today.
Johnson is expected to criticise the unions over members’ industrial action and explain why Transport for London (TFL) is planning 800 job cuts.