Osborne promises £12bn more welfare cuts - where will his axe fall?

Expect big cuts in housing benefit, the removal of child benefit from out-of-work families with more than two children, and a reduction in the benefit cap.

A few weeks before Christmas, George Osborne told the Treasury select committee of his intention to cut "billions" more from the welfare budget if the Tories are in government after the next election, but refused to "put a number on it". Today, in his first speech of the year, he gave us that number, revealing that his department has forecast that "£12bn of further welfare cuts are needed in the first two years of next Parliament." He added: 

That’s how to reduce the deficit without even faster cuts to government departments, or big tax rises on people.

So when you see people on the telly who say that welfare can’t be cut anymore - or, even worse, promising they will reverse the changes we’ve already made and increase housing benefit - ask yourself this:

what public services would they would cut instead?

what taxes they would put up in their place?

or would they borrow and spend more, and risk our country’s economic stability again?

This is what I mean when I say Britain has a choice.

The truth is there are no easy options here, and if we are to fix our country’s problems, and not leave our debts to our children to pay off, then cutting the welfare bill further is the kind of decision we need to make.

This is a clear challenge by Osborne to Labour, which has so far proposed no welfare cuts other than the removal of Winter Fuel Payments from the wealthiest 5% of pensioners (which would raise just £100m).

But aside from the political gamesmanship, it's worth asking how the Chancellor will save the sums he's promised. In his interview on the Today programme this morning, Osborne offered the example of removing housing benefit from under-25s but failed to go further. But to get some idea of where else Osborne's axe will fall, the best source is the speech David Cameron made on welfare in June 2012 when he detailed a series of potential cuts. These included: 

  • 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.

To this list we can likely add a reduction in the household benefit cap of £26,000 (Osborne said last month that "future governments could change the level" and that it would "continue to be a subject of fierce debate") and, perhaps, the withdrawal of universal benefits, such as Winter Fuel Payments, free TV licences and free bus passes, from wealthy pensioners. While Osborne dismissively remarked today that reductions in this area would save only "tens of millions" (that, of course, would depend on the degree of means-testing), it is telling that he and Cameron are being careful to avoid repeating their 2010 pledge to ring-fence the benefits. 

Update: Here's Ed Balls's response to the speech: 

George Osborne is desperate to stop talking about the cost-of-living crisis on his watch. But that won't stop working people from doing so as they are on average £1600 a year worse off under the Tories and prices are still rising faster than wages.  

Nor will the Chancellor admit the reason why he is being forced to make more cuts is because his failure on growth and living standards has led to his failure to balance the books by 2015.

This failure means Labour will have to make cuts and in 2015/16 there will be no more borrowing for day-to-day spending. But we will get the deficit down in a fair way, not give tax cuts to millionaires. And we know that the way to mitigate the scale of the cuts needed is to earn and grow our way to higher living standards for all.

The social security bill is rising under George Osborne, but the best way to get it down for the long-term is to get people into work and build more homes. The Tories should back our compulsory jobs guarantee for young people and the long-term unemployed. And in tough times it cannot be a priority to continue paying the winter fuel allowance to the richest five per cent of pensioners.

What we need is Labour's plan to earn our way to higher living standards for all, tackle the cost-of-living crisis and get the deficit down in a fairer way.

Members of the public in north London walk past a poster informing of changes to the benefits and tax system. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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Voters are turning against Brexit but the Lib Dems aren't benefiting

Labour's pro-Brexit stance is not preventing it from winning the support of Remainers. Will that change?

More than a year after the UK voted for Brexit, there has been little sign of buyer's remorse. The public, including around a third of Remainers, are largely of the view that the government should "get on with it".

But as real wages are squeezed (owing to the Brexit-linked inflationary spike) there are tentative signs that the mood is changing. In the event of a second referendum, an Opinium/Observer poll found, 47 per cent would vote Remain, compared to 44 per cent for Leave. Support for a repeat vote is also increasing. Forty one per cent of the public now favour a second referendum (with 48 per cent opposed), compared to 33 per cent last December. 

The Liberal Democrats have made halting Brexit their raison d'être. But as public opinion turns, there is no sign they are benefiting. Since the election, Vince Cable's party has yet to exceed single figures in the polls, scoring a lowly 6 per cent in the Opinium survey (down from 7.4 per cent at the election). 

What accounts for this disparity? After their near-extinction in 2015, the Lib Dems remain either toxic or irrelevant to many voters. Labour, by contrast, despite its pro-Brexit stance, has hoovered up Remainers (55 per cent back Jeremy Corbyn's party). 

In some cases, this reflects voters' other priorities. Remainers are prepared to support Labour on account of the party's stances on austerity, housing and education. Corbyn, meanwhile, is a eurosceptic whose internationalism and pro-migration reputation endear him to EU supporters. Other Remainers rewarded Labour MPs who voted against Article 50, rebelling against the leadership's stance. 

But the trend also partly reflects ignorance. By saying little on the subject of Brexit, Corbyn and Labour allowed Remainers to assume the best. Though there is little evidence that voters will abandon Corbyn over his EU stance, the potential exists.

For this reason, the proposal of a new party will continue to recur. By challenging Labour over Brexit, without the toxicity of Lib Dems, it would sharpen the choice before voters. Though it would not win an election, a new party could force Corbyn to soften his stance on Brexit or to offer a second referendum (mirroring Ukip's effect on the Conservatives).

The greatest problem for the project is that it lacks support where it counts: among MPs. For reasons of tribalism and strategy, there is no emergent "Gang of Four" ready to helm a new party. In the absence of a new convulsion, the UK may turn against Brexit without the anti-Brexiteers benefiting. 

George Eaton is political editor of the New Statesman.