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8 October 2012

The Lib Dems cave in to Osborne over £10bn welfare cuts

Chancellor secures agreement of Clegg's party for £10bn of further welfare cuts in 2015-16.

By George Eaton

Ahead of George Osborne’s speech to the Conservative conference, the big announcement is that the Chancellor has secured the agreement of Iain Duncan Smith and the Lib Dems to a further £10bn of welfare cuts in 2015-16 on top of the £18bn of cuts already announced. In a joint article for the Daily Mail, Osborne and Duncan Smith write:

[A]s the Treasury illustrated at the time of the last Budget, if the rate of reductions in departmental budgets in the next spending review period is to be kept the same as the current rate, then the welfare budget would have to be reduced by more than £10billion by 2016-17.

We are both satisfied that this is possible and we will work together to find savings of this scale. All of this will require some tough choices, but those choices will be guided by clear principles and a vision of what the welfare system should be.

The cuts are likely to include:

-The abolition of housing benefit for the under-25s.

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-A two-year freeze in most benefits.

-A limit on benefits paid to families with more than two or three children.

Nick Clegg previously insisted that the Lib Dems would not sign up to further welfare cuts without the introduction of some form of wealth or property tax. But with the Chancellor having already ruled out a “mansion tax” or higher council tax bands, it remains unclear what Clegg’s party will receive in return for consenting to another attack on the poorest. One possibility is that the coalition will again increase the top rate of capital gains tax and raise stamp duty on multi-million properties.

The move will also put further pressure on Labour to say whether, if elected, it would stick to Osborne’s spending plans for 2015-16 or adopt its own alternative proposals.