7 Jan 2014

Tories split over Osborne’s welfare cuts strategy

Cracks in the government’s welfare strategy open up after allies of Iain Duncan Smith round on George Osborne for announcing a further £12bn in benefit cuts.

Cracks in the government's welfare strategy open up after allies of Iain Duncan Smith round on George Osborne for announcing a futher £12bn in cuts (Reuters)

Sources close to the work and pensions secretary have briefed newspapers that he is unhappy with the way the chancellor is approaching the issue.

One of Mr Duncan Smith’s allies told the Times that he believed Mr Osborne’s approach to public spending – slashing the benefits bill while protecting pensioners – was “unbalanced”.

Mr Osborne announced on Monday that a further £25bn would be cut from public spending by 2018 to deal with the deficit, with welfare reform accounting for £12bn of this.

‘Year of hard truths’

With the 2015 election in mind, the chancellor said: “If 2014 is a year of hard truths for our country, then it starts with this one – Britain should never return to the levels of spending of the last government.

“We’d either have to return borrowing to the dangerous levels that threatened our stability, or we’d have to raise taxes so much we’d put our country out of business. Government is going to have to be permanently smaller – and so too is the welfare system.”

George Osborne said the best way to put money in people’s pockets was to cut taxes, and the only way this could be achieved was by “permanently cutting the spending those taxes pay for”.

He added: “Welfare cannot be protected from further substantial cuts. I can tell you today that on the Treasury’s current forecasts, £12bn of further welfare cuts are needed in the first two years of the next parliament.”

It is not clear how Mr Osborne intends to achieve these cuts, but he is known to be considering ending housing benefit payments to the under-25s, which would make a small contribution to achieving £12bn in savings.

Iain Duncan Smith, who is already presiding over benefit cuts of £20bn a year by 2018, is thought to be concerned that further reductions could hurt the poorest people in society.

Pensioners protected

Prime Minister David Cameron has said that the so-called pensions “triple lock” would remain in place after the next election, with annual increases rising by at least 2.5 per cent.

He and Mr Osborne have also ruled out cutting pensioners’ benefits, including free bus passes and TV licences and the winter fuel allowance.

Mr Osborne’s welfare cuts have been criticised by his Cabinet colleague Nick Clegg, the Liberal Democrat leader, who said he was making a “monumental mistake” by heaping the burden for cutting the deficit on to those with the “narrowest shoulders”.