George Osborne pledges £12bn more welfare cuts in two years after general election

No housing benefit for under-25s and no council homes for £60k earners
Welfare cuts: Chancellor George Osborne giving a speech in Birmingham
Chancellor George Osborne gives a speech on the economy during his visit to manufacturing company Sertec, Coleshill in Birmingham. PRESS ASSOCIATION Photo. Picture date: Monday January 6, 2014. The Chancellor has set out plans to cut a further £25 billion
7 January 2014
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A massive £12 billion of welfare cuts are needed in the two years after the 2015 general election, George Osborne announced today.

Declaring that benefits “cannot be protected” he signalled that under-25s would be stripped of the right to claim housing benefit.

People living in council houses and earning more than £60,000 should be told to find homes in the private sector, he also suggested. For the first time the Chancellor confirmed that a post-2015 Tory government would slash £25 billion from overall spending by 2017/18, and said welfare cuts should make up almost half of the cuts.

He said next year would one of “ hard truths” for voters and rival parties to decide upon.

In a speech to businessmen at a Birmingham factory, he said: “So here’s another hard truth. Welfare cannot be protected from further substantial cuts. On the Treasury’s current forecasts, £12 billion of further welfare cuts are needed in the first two years of next Parliament.” Treasury sources were unable to say how much might be saved by targeting wealthy people in council houses. Neither could they say what the saving would be from Mr Osborne’s proposed cut in housing benefit.

Mr Osborne said attacking the benefits bill would soften cuts to government departments such as the police and avoid big tax rises.

And it threw down the gauntlet to Labour and the Liberal Democrats to either match his intentions or say where else they would cut spending or raise taxes to close the deficit.

“Government is going to have to be permanently smaller and so too is the welfare system,” he said.

Within minutes of his speech he was contradicted by Lib-Dem leader Nick Clegg.

The Deputy Prime Minister made clear that his party would not go along with welfare cuts on that scale and said a mansion tax on high-value properties was one alternative way of balancing the books without shrinking state handouts.

“I imagine that the Liberal Democrats will want to get a greater share from the wealthiest, while the Conservatives seem to want to target the poorest in society,” said a source close to Mr Clegg.

Labour said the extra cuts were only needed because Mr Osborne’s plan for the economy had failed.

Mr Osborne insisted cuts could not be ducked. “The bad news is: there’s still a long way to go. We’re borrowing around £100 billion a year and paying half that money a year in interest just to service our debts.

“We’ve got to make more cuts — £17 billion this coming year, £20 billion next year. And over £25 billion further across the two years after. That’s more than £60 billion in total.”

But his speech was highly electioneering in tone and substance. Setting out the classic strategy of an incumbent government, he argued that although he demanded painful sacrifices, changing direction would bring economic ruin.

Earlier, in a Radio 4 interview, Mr Osborne virtually ruled out a Tory government stripping wealthier pensioners of perks such as winter fuel payments, free prescriptions, bus passes and television licences.

Shadow chief secretary to the Treasury Chris Leslie said: “ George Osborne should admit his policies have failed and led to a cost-of-living crisis. While millions of ordinary working people are worse off under the Tories, he and David Cameron are paving the way for yet another top rate tax cut for millionaires.”

'Cost of pension will rocket'

Joe Murphy

David Cameron’s vow to raise pensions will mean other services being squeezed “really, really tightly”, an expert warned today.

Paul Johnson, head of the Institute for Fiscal Studies, cautioned that the cost of Mr Cameron’s promise to continue the “ triple lock” — guaranteeing that pensions will go up — would rise dramatically in future decades.

Pensions minister Steve Webb, the Lib-Dem who devised the formula, has estimated the cost at £45 billion between now and 2025. But Mr Johnson said that by 2050 and 2060 the cost would balloon to £15 billion a year. “Pensions and the NHS are the two biggest things the state does,” he said. “If you protect those two things and you are reducing the size of the state altogether, then everything else is being squeezed really, really tightly.”

Police and other non-protected services have already been ordered to cut about 20 per cent from their budgets.

Last week former Tory defence secretary Liam Fox, an ex-GP, called for the NHS pledge to be dumped. “Anybody who has worked with or around the NHS knows there is still a huge amount of waste associated with it,” he said.

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