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Osborne promises "billions" more in welfare cuts - where will his axe fall?

The Chancellor suggests a future Tory government would make large welfare cuts, including a lower benefit cap.

George Osborne speaks at the Conservative conference in Manchester earlier this year. Photograph: Getty Images.

George Osborne has long made it clear that he would like to make greater welfare cuts than the Liberal Democrats will allow, but rarely has he been as explicit as he was at today's Treasury select committee hearing. After Labour's Pat McFadden noted the OBR's finding that day-to-day departmental spending was forecast to fall to its lowest level since records began in 1948, Osborne replied that this figure did not take into account the "further welfare savings" he would make. While refusing to "put a number on it" (such as the IFS forecast that £12bn of welfare cuts or tax rises will be required to keep cuts at their current pace), he said that he wanted "billions" more cut from the welfare budget. 

What cuts could he have in mind? It's worth looking back at the speech David Cameron made on the subject in June 2012 when he outlined a series of possible measures, including: 

  • The restriction of child-related benefits for families with more than two children.
  • A lower rate of benefits for the under-21s.
  • Preventing school leavers from claiming benefits.
  • Paying benefits in kind (like free school meals), rather than in cash.
  • Reducing benefit levels for the long-term unemployed. Cameron said: "Instead of US-style time-limits – which remove entitlements altogether – we could perhaps revise the levels of benefits people receive if they are out of work for literally years on end".
  • A lower housing benefit cap. Cameron said that the current limit of £20,000 was still too high.
  • The abolition of the "non-dependent deduction". Those who have an adult child living with them would lose up to £74 a week in housing benefit.

Osborne would also likely reduce the household benefit cap of £26,000 (he said today that "future governments could change the level" and Tory MPs have been pushing for one of £20,000) and maintain the 1% cap on benefit increases (a real-terms cut). 

At present, the Tories have been prevented from making the cuts above by the Lib Dems, who have refused to consider further reductions until Osborne ends the ring-fencing of pensioner benefits. But should Cameron avoid repeating his 2010 pledge to protect the latter, the door would be opened to further welfare cuts under another Tory-Lib Dem coalition.