George Osborne: Cap brought in on benefit claims

George Osborne on "tough but fair" welfare state

Chancellor George Osborne has announced plans for a maximum limit on the amount of benefits one family can claim.

He told the Conservative conference the cap would be set at the amount "the average family gets for going out to work", which is about £26,000 a year.

The cap will apply to the combined income from benefits including things like jobseekers allowance, housing benefit and council tax benefit.

An estimated 50,000 households may be affected by the cap, planned for 2013.

Mr Osborne said there would be "no more open chequebook" for out-of-work families.

The limit on benefits would apply to the total received from jobseekers' allowance, income support, employment support allowance, housing benefit, council tax benefit, child benefit and child tax credit.

It would also would include carer's allowance and industrial injuries disablement benefit - although it would not include one-off benefits such as social fund loans and non-cash benefits such as free school meals or working tax credits.

All households with a disability living allowance claimant will be exempted from this measure, as would war widows.

The plan is for local authorities to be asked to assess the total benefit income from 2013 of all new and existing housing benefit claimants, reducing the benefit if necessary so the total remains within the cap.

It came as he defended his plans to cut spending and end child benefit for higher rate taxpayers.

In a keynote speech to the Tory conference, he said Labour's proposal for reducing spending more slowly meant their cuts "wouldn't be smaller - they would be bigger and last longer".

Heralding wholesale welfare reforms, he said the current system was "unaffordable... morally indefensible" and should no longer support people who had made the "mistaken choice" to live on benefits.

He confirmed his earlier announcement that child benefit for higher rate taxpayers from 2013 in order would be axed to save £1bn a year.

Any couples where one parent earns about £44,000 - roughly the 40% tax level - and above will be affected.

'National interest'

Explaining his thinking to the party faithful, Mr Osborne said there could be no delay in paying off Britain's deficit and warned that if he now adopted Labour policy there would be "market turmoil, the flight of investors... the return of crippling instability, Britain on the brink".

He added that the UK was already paying £120m debt interest every day to foreign governments "so they can build the schools and hospitals for their own citizens that we aren't able to afford for ours".

He said Labour offered a "decade lost to debt", adding that "my generation won't stand for it".

He contrasted his actions "in the national interest" with new Labour leader Ed Miliband's policy designed for the "vested interests" of the "trade union leaders who put him where he is".

And the chancellor claimed that not only a string of global and British economic and business organisations agree with him, but also "one of the Miliband brothers, Tony Blair and the British people".

The chancellor, who has spent weeks embroiled in negotiations with ministers facing departmental budget cuts of up to 40%, stressed the future benefits of tackling the deficit.

'No divine right'

He said there would be spending in a "green investment bank", in transport schemes and in bringing in the pupil premium "so that the poorest in our country have access to the kind of education currently only available to the richest".

Spending review branding

A special BBC News season examining the approaching cuts to public sector spending

"Britain has no divine right to be one of the richest countries in the world... we will do everything to make Britain one of the most competitive places in the world to do business," he will add.

Mr Osborne added: "The hard economic choices we make are but a means to an end, and that end is prosperity for all.

"The foundations of a strong economy don't rest alone on the decisions of ministers... they come from the most basic human instincts of all. The aspiration to have a better life, to get a better job, to give your children a better future."

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