Support 100 years of independent journalism.

  1. Business
  2. Economics
6 January 2014

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.

By George Eaton

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. 

Sign up for The New Statesman’s newsletters Tick the boxes of the newsletters you would like to receive. Quick and essential guide to domestic and global politics from the New Statesman's politics team. The New Statesman’s global affairs newsletter, every Monday and Friday. The best of the New Statesman, delivered to your inbox every weekday morning. A handy, three-minute glance at the week ahead in companies, markets, regulation and investment, landing in your inbox every Monday morning. Our weekly culture newsletter – from books and art to pop culture and memes – sent every Friday. A weekly round-up of some of the best articles featured in the most recent issue of the New Statesman, sent each Saturday. A weekly dig into the New Statesman’s archive of over 100 years of stellar and influential journalism, sent each Wednesday. Sign up to receive information regarding NS events, subscription offers & product updates.
I consent to New Statesman Media Group collecting my details provided via this form in accordance with the Privacy Policy