Osborne secretly plans £2.5bn cut to sickness benefit

Leaked document shows that the Chancellor wants to slash support for people too ill to work.

Leaked document shows that the Chancellor wants to slash support for people too ill to work.

Leaked documents have shown that George Osborne is secretly planning to cut sickness benefits by £2.5bn.

The plan is detailed in a confidential letter from Osborne to the Work and Pensions Secretary, Iain Duncan Smith, which was seen by the Observer.

Written on 19 June (three days before the Emergency Budget) and also sent to David Cameron and Nick Clegg, the letter says:

Given the pressure on overall public spending in the coming period, we will need to continue developing further options to reform the benefits as part of the spending review process in order to deliver further savings, greater simplicity and stronger work incentives.

Reform to the employment support allowance is a particular priority and I am pleased that you, the prime minister and I have agreed to press ahead with reforms to the ESA as part of the spending review that will deliver net savings of at least £2.5bn by 2014-15.

The employment and support allowance (ESA) is the successor to incapacity benefits, and is paid to those who are unable to work because of disability or illness.

Duncan Smith is currently locked into negotiations with the Treasury over his proposed reform to the welfare system, which will require immediate investment in order to incentivise working in the long-term.

This revelation has done little to ease the tension. The Department for Work and Pensions insisted that nothing has been decided, stressing that "our reforms will ensure that the most vulnerable in our society are protected." Some within Duncan Smith's camp have even accused the Treasury of leaking the letter to force them into accepting the plan.

The proposed cuts are disturbing, but hardly surprising. Just last week, Osborne launched an astonishing attack on people who have made the "lifestyle choice" to be on benefits, announcing an extra £4bn cuts.

A government spokeswoman dismissed the leak, saying that the £2.5bn figure was "totally out of date", and that negotiations on ESA were ongoing. Possible changes could include means-testing recipients, and limiting the amount of time that people can spend on ESA.

The Institute for Fiscal Studies showed unequivocally last month that the Budget was regressive, and would disproportionately affect the very poorest in society. To this already punitive Budget, with its drastic cuts to housing benefits, add the extra reductions that Osborne announced last week and this latest news. You have a picture of an assault on the welfare state and a worrying propensity to go after the most vulnerable in society.

Samira Shackle is a freelance journalist, who tweets @samirashackle. She was formerly a staff writer for the New Statesman.

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Why Theresa May won't exclude students from the net migration target

The Prime Minister believes the public would view the move as "a fix". 

In a letter to David Cameron shortly after the last general election, Philip Hammond demanded that students be excluded from the net migration target. The then foreign secretary, who was backed by George Osborne and Sajid Javid, wrote: "From a foreign policy point of view, Britain's role as a world class destination for international students is a highly significant element of our soft power offer. It's an issue that's consistently raised with me by our foreign counterparts." Universities and businesses have long argued that it is economically harmful to limit student numbers. But David Cameron, supported by Theresa May, refused to relent. 

Appearing before the Treasury select committee yesterday, Hammond reignited the issue. "As we approach the challenge of getting net migration figures down, it is in my view essential that we look at how we do this in a way that protects the vital interests of our economy," he said. He added that "It's not whether politicians think one thing or another, it's what the public believe and I think it would be useful to explore that quesrtion." A YouGov poll published earlier this year found that 57 per cent of the public support excluding students from the "tens of thousands" target.

Amber Rudd, the Home Secretary, has also pressured May to do so. But the Prime Minister not only rejected the proposal - she demanded a stricter regime. Rudd later announced in her conference speech that there would be "tougher rules for students on lower quality courses". 

The economic case for reform is that students aid growth. The political case is that it would make the net migration target (which has been missed for six years) easier to meet (long-term immigration for study was 164,000 in the most recent period). But in May's view, excluding students from the target would be regarded by the public as a "fix" and would harm the drive to reduce numbers. If an exemption is made for one group, others will inevitably demand similar treatment. 

Universities complain that their lobbying power has been reduced by the decision to transfer ministerial responsibility from the business department to education. Bill Rammell, the former higher education minister and the vice-chancellor of Bedfordshire, said in July: “We shouldn’t assume that Theresa May as prime minister will have the same restrictive view on overseas students that Theresa May the home secretary had”. Some Tory MPs hoped that the net migration target would be abolished altogether in a "Nixon goes to China" moment.

But rather than retreating, May has doubled-down. The Prime Minister regards permanently reduced migration as essential to her vision of a more ordered society. She believes the economic benefits of high immigration are both too negligible and too narrow. 

Her ambition is a forbidding one. Net migration has not been in the "tens of thousands" since 1997: when the EU had just 15 member states and the term "BRICS" had not even been coined. But as prime minister, May is determined to achieve what she could not as home secretary. 

George Eaton is political editor of the New Statesman.