Osborne doesn’t see that voters can love the idea of benefit cuts but end up hating the cutters

The Chancellor should not assume that there is no political limit to how deep his welfare cuts can go.

Chancellor George Osborne leaves 11 Downing Street in London. Photograph: Getty Images.

It is the noisy, knife-edge votes in parliament that furnish the drama. As a piece of theatre, the vote on 21 November on a statutory instrument filling gaps in the Welfare Reform Act will be a non-event. It is a “deferred division”, a bit of legislative housekeeping that allows MPs to indicate their preferences without debate. Results are published without fanfare.

Yet this shuffling of regulations into law is momentous for hundreds, possibly thousands of families. It finalises the conditions that mean, after April 2013, they could be evicted from their homes. That is when the “benefits cap” comes into force, limiting the amount any household can receive to £500 per week; £350 for childless singles.

The level is set to match the average wage, which is what makes the cap politically effective. The view that work should be more lucrative than inactivity and that state handouts must have a limit is, for most voters, irresistible. The most common public objection is that the cap is too generous.

Few households are technically in receipt of benefits above the capped level – around 20,000, mostly in London. None of them feels it as disposable income. The numbers are inflated by housing benefit (already subject to a separate cap), which has run out of control chasing the capital’s exorbitant rents. Yet outrage at perversities in the current system is greater than attention to the detail of who is affected by coalition policy. That anger has been successfully exploited by Conservatives, painting Labour as the party for handing public money to wastrels.

Passing the mirror test

Defenders of the cap point out that its effects can be avoided by the acquisition of a job. Besides, they ask, why should unemployed families have privileged access to expensive postcodes when low-paid workers have to rent within their means? The argument resonates with anyone weighed down by housing costs.

The problem is that evicted families, most with a few children since the cap makes no allowances for fecundity, will end up being rehoused in areas where there is no guarantee of work or a spare school place. Hundreds could end up homeless. When the costs of dislocation are factored in, the saving for the Exchequer will be nil.

While some of the coalition’s welfare policies might be honourably motivated, the function of this particular change is neither budget consolidation nor reform. It is a gesture of pure political positioning by George Osborne that happens, as a side effect, to turn some of London’s poorest families out of their homes.

So far, it is working. The Tories taunt Labour for their refusal to back the cap. Ed Miliband is torn between honouring his party’s historic obligation to defend the destitute and courting voters for whom welfare iniquities were a reason for deserting Labour in 2010.

The Liberal Democrats have a different dilemma. They want to look fiscally responsible while retaining their self-image as socially conscientious objectors. One party strategist talks about calibrating compromise with the Tories in terms of “passing the mirror test” – can Lib Dems look themselves in the eye believing they have done what they can to mitigate the harshest consequences of austerity?

There are those who think that the benefits cap fails that test. “It exists purely to divide society,” says one prominent Lib Dem. “It is politically motivated and it is immoral.” Many more are reconciled to the cuts they have already backed but squeamish about the next wave. Senior figures in the party query the Conservatives’ capacity to grasp the social implications of benefit-bashing. “On the whole, they have no understanding of the people who are affected by this stuff,” says a Lib Dem cabinet minister.

That mood conditions Nick Clegg’s stance in negotiations over the Autumn Statement on 5 December, when the Chancellor must announce new devices for containing the deficit. The Tories are targeting the benefits bill for billions more in cuts. The Lib Dems accept that welfare spending will face another squeeze but demand tax rises on the rich – specifically a levy on expensive property – to spread the burden of pain.

Underpinning the whole process is Osborne’s strategic judgement that there is no limit to how deep the axe can be planted in welfare entitlements because voters think that they are mostly a scam. It is a view largely supported by opinion polls. Labour strategists concede that hostility to welfare “scroungers” remains fierce. There isn’t even much evidence of solidarity between different categories of benefit claimant.

Blind spot

That doesn’t mean there is no compassion threshold in British society – a line beyond which the public suddenly recoils from the consequences of a policy, regardless of its advertised economic necessity. Fickle voters can demand welfare cuts and still see them as reinforcing the Conservatives’ reputation for heartlessness. “[The Tories] need to be careful,” says one Clegg adviser. “It is entirely possible to do a lot of things that poll favourably and then find that the cumulative effect is to make you very unpopular.”

This is a blind spot for David Cameron and Osborne. They know all about the problems with the Tory brand. They have heard the focus groups and studied the polls. Yet, by definition, they cannot identify with the strain in British culture that instinctively ascribes the worst possible motive to Conservatives. As members of the party, how could they? They can read about a suspicion that Tories ultimately always side with their rich friends and neglect the poor but they cannot inhabit the prejudice in a way that would tune their political antennae to what seems fair to the non-aligned voter.

That makes it a perverse kind of blessing to be in coalition with a party full of people with wariness of Tories in their bones and a strategic plan to monopolise the credit for anything that looks compassionate in the government programme. So when Lib Dems say that a line is being crossed, that welfare cuts are starting to look vindictive and that they must be offset with tax rises for the wealthy, the Prime Minister and the Chancellor might think it a negotiating ploy by political rivals. It is. They should nonetheless seriously consider the possibility that it is also true.