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29 Sep 2014

Benefits frozen in fresh attack on welfare spending

Working-age benefits will be frozen for two years, Chancellor George Osborne tells the Conservative party conference in Birmingham.

George Osborne claimed the freeze would help enable the UK to save £3.2 billion a year by 2017 and would help protect the country’s economic stability.

“The fairest way to reduce welfare bills is to make sure that benefits are not rising faster than the wages of the taxpayers who are paying for them. For we will provide a welfare system that is fair to those who need it, and fair to those who pay for it too” Mr Osborne said.

This is the choice Britain needs to take to protect our economic stability and to secure a better future. George Osborne

He added: “And to those in work I say this – where is the sense in taxing you more only for you to be given some of your own money back in welfare. The best way to support people’s incomes is to make sure those out of work get a job and those in work pay less tax.”

The Tories announced the initiative, which will not affect smaller benefits such as statutory maternity pay, after a series of setbacks rocked the Conservative party conference. Disability, carer and pensioner benefits are also excluded from the measures.

The benefits included in the cap are main rates of jobseeker’s allowance, tax credits, universal credit, child benefit, income support, the work-related activity group component in employment and support allowance, and local housing allowance rates in housing benefit.

Also speaking at the conference, Work and Pensions Secretary Iain Duncan Smith unveiled a scheme for people with habits to receive their benefit payments on pre-paid cards which could not be used to buy alcohol and drugs.

‘Britain has been the lantern in the storm’

The chancellor, who received a standing ovation, said that Britain “has been the lantern in the storm” in the European financial crisis. He won applause as he confirmed the immediate abolition of the 55 per cent penalty tax on pension pots being passed on by savers to children or grandchildren after their death.

David Cameron backed the proposals in a tweet posted after the announcement:

Labour shadow treasury minister Chris Leslie however slammed the chancellor as only serving to help “the richest”:

‘Freedom for people’s pensions’

In his speech to the conference, Mr Osborne said the change to the pension tax, dubbed the “death tax”, would deliver “freedom for people’s pensions.

“Passing on your pension tax free – Not a promise for the next Conservative government, but put in place by Conservatives in government now.” And he added: “People who have worked and saved all their lives will be able to pass on their hard-earned pensions to their families tax-free.

“The children and grandchildren and others who benefit will get the same tax treatment on this income as on any other, but only when they choose to draw it down.”

The measure will apply to anyone inheriting cash held in a pension fund from April 2015 and is expected to benefit the families of hundreds of thousands of people to the tune of a total £150 million each year. If the person passing on the pension pot is over 75, there will be no tax to pay at all.

In the wake of Mark Reckless’ defection to Ukip many will look to Mr Osborne to steady the ship and set the agenda back onto the economy.

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