Will Clegg cave in on freezing benefits?

Lib Dem leader may agree to Osborne's benefits freeze in exchange for a wealth tax.

Last year it was the Liberal Democrats, along with Iain Duncan Smith, who vetoed George Osborne's plan to freeze benefits on the grounds that the poorest should not be squeezed even more. Now, with his deficit reduction programme increasingly off track, the Chancellor has come back for a second try. As I wrote yesterday, Osborne is reportedly considering freezing most benefits for two years and then linking them to wages, rather than prices (the former are expected to rise more slowly than the latter, a sure sign of a depressed economy). The plan would hit the poorest hardest and further depress growth (the poor spend, rather than save, what little they receive) but Osborne, a man with a deficit target to meet, will likely wave away such quibbles.

And it looks as if he may get his way. Today's Sun reports a source close to Clegg as saying, "This is a time of incredible economic challenges and we have to look at all the options available." It's the sort of story perfectly timed to unsettle the Lib Dem faithful as they gather  for their annual conference in Brighton this weekend. The party, most of whose activists remain solidly social democratic, has already accepted £18bn of welfare cuts (Osborne is attempting to secure a further £10bn), will it really acquiesce to yet another raid on the poorest? Provided certain conditions are met, the answer is yes. Clegg has openly said that he is willing to agree to further welfare cuts in exchange for some form of wealth tax.

He told the Guardian last month: "The blunt truth is that we will need to find further savings in welfare. It constitutes close to a third of total government expenditure ... Welfare reform does have a continuing role. But that has to be done in a way which starts at the top rather than starts at the bottom."

But if Clegg does want to strike a grand bargain with Osborne he had better make sure it is one worthy of the name. Before the 50p tax rate was abolished, we were told that the Lib Dems would only accept such a move in return for the introduction of a "mansion tax". Yet the rate was scrapped and all Clegg's party received in return was a higher rate of stamp duty on £2m properties and some token action on tax avoidance. In the eyes of the voters, the Lib Dems were complicit in a giveaway to the richest. If Clegg is to avoid relinquishing any more credibility, he must not repeat this error.

George Osborne is considering a two-year freeze on most benefits. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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Is anyone prepared to solve the NHS funding crisis?

As long as the political taboo on raising taxes endures, the service will be in financial peril. 

It has long been clear that the NHS is in financial ill-health. But today's figures, conveniently delayed until after the Conservative conference, are still stunningly bad. The service ran a deficit of £930m between April and June (greater than the £820m recorded for the whole of the 2014/15 financial year) and is on course for a shortfall of at least £2bn this year - its worst position for a generation. 

Though often described as having been shielded from austerity, owing to its ring-fenced budget, the NHS is enduring the toughest spending settlement in its history. Since 1950, health spending has grown at an average annual rate of 4 per cent, but over the last parliament it rose by just 0.5 per cent. An ageing population, rising treatment costs and the social care crisis all mean that the NHS has to run merely to stand still. The Tories have pledged to provide £10bn more for the service but this still leaves £20bn of efficiency savings required. 

Speculation is now turning to whether George Osborne will provide an emergency injection of funds in the Autumn Statement on 25 November. But the long-term question is whether anyone is prepared to offer a sustainable solution to the crisis. Health experts argue that only a rise in general taxation (income tax, VAT, national insurance), patient charges or a hypothecated "health tax" will secure the future of a universal, high-quality service. But the political taboo against increasing taxes on all but the richest means no politician has ventured into this territory. Shadow health secretary Heidi Alexander has today called for the government to "find money urgently to get through the coming winter months". But the bigger question is whether, under Jeremy Corbyn, Labour is prepared to go beyond sticking-plaster solutions. 

George Eaton is political editor of the New Statesman.