Osborne plans further £10 billion cut in welfare benefits after 2015 election

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  By a Newsnet reporter

Conservative Chancellor George Osborne is expected to tell the Conservative party conference in Manchester today that if re-elected after the 2015 Westminster general election, he plans to slash a further £10 billion annually from the welfare benefits budget.  The new cuts would come into effect from 2016, and will come on top of the £18 billion in cuts which have already been announced.  

Mr Osborne has reportedly secured an agreement from the Work and Pensions Secretary, Iain Duncan Smith to implement the new round of cuts, and has promised the Liberal Democrats that they will be balanced by a bigger contribution from the rich.

However during his speech to the Conservative conference today, the Chancellor will rule out the key Lib Dem demand of a mansion tax on properties worth over £2 million, which Prime Minister David Cameron insisted would be “unfair”.  

Mr Osborne is expected to defend the decision to resist the mansion tax, saying:

“We are not going to have a mansion tax or a new tax that’s a percentage value of properties. We don’t think people who have worked hard, saved up to buy a home, should be clobbered.”

The Chancellor and the Prime Minister have yet to specify how the better off will be expected to contribute more.  

Mr Osborne was more forthcoming in his plans cut the incomes of the poorest.  The exact nature of the new cuts to welfare benefits has not been revealed, but it is understood that the plan will include restricting housing benefit to the over-25s and restrictions on uprating benefits.  The cut is likely to mean 380,000 younger people losing their entitlement to housing benefit, the average payment is £80 per week.  The reform would save the Treasury £1.8 billion.

The Chancellor and the Work and Pensions Secretary will also seek to restrict extra benefit payments to unemployed people who have additional children.  

Writing in the Daily Mail, in an article entitled “How we will end the something for nothing culture“, Chancellor Osborne and Work and Pensions Secretary Iain Duncan Smith ask:

“Is it right that school leavers should be able to move directly from school to a life on housing benefit without finding a job first?

“Is it right that people in work have to consider the full financial costs of having another child while those who are out of work don’t?”

Young adults will be especially badly hit by the housing benefit cut, as younger people are far more likely to suffer the effects of poor employment prospects in a struggling economy.  Unemployment amongst the under 25s in the UK rose from 13.6% in December 2007 to 21.9% in March 2012, and is set to rise even further.   

The UK Goverment will expect young unemployed people to live with their parents.  However homelessness charities point out that this is not always possible.  Many young people have experienced family breakdown, and may be estranged from their parents.  In many other cases the parental family is simply unable to afford to support an adult child or is already living in overcrowded conditions.  Shelter Scotland, the housing and homelessness charity, pointed out in a report published in April 2011 that 10% of Scottish children live in overcrowded households.  

Young homeless people are already over-represented in the homeless population. According to figures from Shelter Scotland, young adults represent 37% of all homeless households despite only four per cent of all households in Scotland being headed by someone under 25.  If housing benefit entitlement is removed from people under the age of 25, the number of young homeless people is likely to increase dramatically.

Yet Mr Osborne and Mr Duncan Smith hint that this new round of cuts may not be the last.  They point out that in order to meet the UK Government’s deficit reduction targets, the welfare budget may have to be reduced by even more than the £10 billion worth of cuts the Chancellor announced today.   

They write: “We are both satisfied that this is possible and we will work together to find savings of this scale.”

The Chancellor’s announcement will prove an embarrassment for Coalition partners the Liberal Democrats.  At their recent conference in Brighton, party leader and Deputy Prime Minister Nick Clegg said that he would not tolerate “wild suggestions” of a further £10 billion in welfare benefit cuts.  Mr Osborne’s number 2, Chief Secretary to the Treasury Danny Alexander, told the Lib Dem conference: “We simply will not allow the books to be balanced in a way that hits the poorest hardest”.

Johann Lamont, leader of the Labour party in Scotland, is also likely to be left embarrassed by Mr Osborne’s announcement and Daily Mail article, which use language and phraseology identical to that used by Ms Lamont in her own recent attack on Scotland’s “something for nothing” culture.