Osborne puts housing benefit for under-25s first in line for cuts

The Chancellor says he will prioritise further cuts to the housing benefit budget before making any changes to universal pensioner benefits.

Depending on who you believe, David Cameron is either preparing to withdraw benefits from wealthy pensioners after the next election, or is set to pledge to ring-fence them again. Cameron's refusal to promise to protect universal benefits such as Winter Fuel Payments, free TV licences and free bus passes on The Andrew Marr Show yesterday, in contrast with his pledge to maintain the triple lock on the state pension (so that it rises in line with inflation, earnings, or 2.5%, whichever is highest), was widely interpreted as preparing the ground for a U-turn. But a Downing Street source tells today's Daily Mail that the PM is "minded to repeat the pledge" (which has seen pensioner benefits protected throughout this parliament) and that he remains personally committed to preserving the benefits for all pensioners, not just the poorest. 

It was left to George Osborne, who is more open to cuts in this area than Cameron, to try and provide some clarity in his first interview of the year on the Today programme this morning. Osborne refused to rule out the withdrawal of benefits from some pensioners, repeatedly stating that he was "not writing the Conservative manifesto today", but offered an important indication of his priorities. There would certainly be further welfare cuts (Osborne has previously declared that he hopes to cut "billions" more from the budget), but pensioner benefits would not be first in line. The Chancellor suggested that reducing their scope would save only "tens of millions", adding that "it is not where you need to make the substantial savings required". Instead, he singled out housing benefit for the under-25s as the first target for cuts and took aim at those "on incomes of £60-£70,000 living in council homes". 

Osborne is right to point out that means-testing pensioner benefits would not raise the sums that many suggest. Last year the government spent £2.2bn a year on winter fuel payments, £1bn on free bus passes and £600m on free TV licences. Compare that to the £23.8bn annually spent on housing benefit (owing to extortionate rents and substandard wages) and the £27.2bn spent on tax credits (owing to inadequate pay) and it becomes clear where the real savings are to be made. Labour's pledge to withdraw Winter Fuel Payments from the wealthiest 5% of pensioners is expected to save just £100m.

But Osborne's preferred approach of salami slicing the welfare budget, rather than addressing its underlying causes, will not raise significant sums either. For all the human misery they have caused, the household benefit cap is forecast to save just £110m a year by the DWP, while the bedroom tax will raise just £490m (and both, as analysts have warned, may end up costing more than they save by increasing homelessness and other social ills). 

Throughout the interview, Osborne repeatedly referred to his "values" and the state's duty to ensure "dignity and security in old age". But in this instance, his motives (as so often) are nakedly political. While spending on the NHS and the state pension is among the most popular (and the over-65s are the most likely age group to vote), few will object to the abolition of housing benefit for the under-25s (the least likely age group to vote). With the Tories increasingly focused on chasing the grey vote, the question facing Labour is whether it is prepared to speak up for the young. 

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

George Eaton is political editor of the New Statesman.

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After Richmond Park, Labour MPs are haunted by a familiar ghost

Labour MPs in big cities fear the Liberal Democrats, while in the north, they fear Ukip. 

The Liberal Democrats’ victory in Richmond Park has Conservatives nervous, and rightly so. Not only did Sarah Olney take the votes of soft Conservatives who backed a Remain vote on 23 June, she also benefited from tactical voting from Labour voters.

Although Richmond Park is the fifth most pro-Remain constituency won by a Conservative at the 2015 election, the more significant number – for the Liberal Democrats at least – is 15: that’s the number of Tory-held seats they could win if they reduced the Labour vote by the same amount they managed in Richmond Park.

The Tories have two Brexit headaches, electorally speaking. The first is the direct loss of voters who backed David Cameron in 2015 and a Remain vote in 2016 to the Liberal Democrats. The second is that Brexit appears to have made Liberal Democrat candidates palatable to Labour voters who backed the party as the anti-Conservative option in seats where Labour is generally weak from 1992 to 2010, but stayed at home or voted Labour in 2015.

Although local council by-elections are not as dramatic as parliamentary ones, they offer clues as to how national elections may play out, and it’s worth noting that Richmond Park wasn’t the only place where the Liberal Democrats saw a dramatic surge in the party’s fortunes. They also made a dramatic gain in Chichester, which voted to leave.

(That’s the other factor to remember in the “Leave/Remain” divide. In Liberal-Conservative battlegrounds where the majority of voters opted to leave, the third-placed Labour and Green vote tends to be heavily pro-Remain.)

But it’s not just Conservatives with the Liberal Democrats in second who have cause to be nervous.  Labour MPs outside of England's big cities have long been nervous that Ukip will do to them what the SNP did to their Scottish colleagues in 2015. That Ukip is now in second place in many seats that Labour once considered safe only adds to the sense of unease.

In a lot of seats, the closeness of Ukip is overstated. As one MP, who has the Conservatives in second place observed, “All that’s happened is you used to have five or six no-hopers, and all of that vote has gone to Ukip, so colleagues are nervous”. That’s true, to an extent. But it’s worth noting that the same thing could be said for the Liberal Democrats in Conservative seats in 1992. All they had done was to coagulate most of the “anyone but the Conservative” vote under their banner. In 1997, they took Conservative votes – and with it, picked up 28 formerly Tory seats.

Also nervous are the party’s London MPs, albeit for different reasons. They fear that Remain voters will desert them for the Liberal Democrats. (It’s worth noting that Catherine West, who sits for the most pro-Remain seat in the country, has already told constituents that she will vote against Article 50, as has David Lammy, another North London MP.)

A particular cause for alarm is that most of the party’s high command – Jeremy Corbyn, Emily Thornberry, Diane Abbott, and Keir Starmer – all sit for seats that were heavily pro-Remain. Thornberry, in particular, has the particularly dangerous combination of a seat that voted Remain in June but has flirted with the Liberal Democrats in the past, with the shadow foreign secretary finishing just 484 votes ahead of Bridget Fox, the Liberal Democrat candidate, in 2005.

Are they right to be worried? That the referendum allowed the Liberal Democrats to reconfigure the politics of Richmond Park adds credence to a YouGov poll that showed a pro-Brexit Labour party finishing third behind a pro-second referendum Liberal Democrat party, should Labour go into the next election backing Brexit and the Liberal Democrats opt to oppose it.

The difficulty for Labour is the calculation for the Liberal Democrats is easy. They are an unabashedly pro-European party, from their activists to their MPs, and the 22 per cent of voters who back a referendum re-run are a significantly larger group than the eight per cent of the vote that Nick Clegg’s Liberal Democrats got in 2015.

The calculus is more fraught for Labour. In terms of the straight Conservative battle, their best hope is to put the referendum question to bed and focus on issues which don’t divide their coalition in two, as immigration does. But for separate reasons, neither Ukip nor the Liberal Democrats will be keen to let them.

At every point, the referendum question poses difficulties for Labour. Even when neither Ukip nor the Liberal Democrats take seats from them directly, they can hurt them badly, allowing the Conservatives to come through the middle.

The big problem is that the stance that makes sense in terms of maintaining party unity is to try to run on a ticket of moving past the referendum and focussing on the party’s core issues of social justice, better public services and redistribution.

But the trouble with that approach is that it’s alarmingly similar to the one favoured by Kezia Dugdale and Scottish Labour in 2016, who tried to make the election about public services, not the constitution. They came third, behind a Conservative party that ran on an explicitly pro-Union platform. The possibility of an English sequel should not be ruled out.  

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.