George Osborne targets welfare as he warns of £25bn more cuts


Chancellor George Osborne warns 2014 will be a "year of hard truths"

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A further £25bn spending cuts - much of it from the welfare budget - will be needed after the next election, Chancellor George Osborne has warned.

He said more austerity lay ahead, as the job was "not even half done".

He suggested making welfare savings by cutting housing benefit for under-25s and restricting council housing for those earning over £65,000 a year.

But Deputy Prime Minister Nick Clegg said targeting the working-age poor was "extreme... unrealistic and unfair".

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Mr Osborne wants to set the political baseline for the economic argument in the run up to the next general election. ”

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The Lib Dem leader said he had a "very different vision" from the Conservatives about how to balance the books during the next Parliament and believed the wealthy should pay more in tax.

The £25bn figure is in line with the already announced intention to balance the government's books by 2018. It suggests cuts will continue at the same rate as during the current Parliament.

BBC political editor Nick Robinson said Mr Osborne's announcement was as much about politics as economics.

Mr Osborne, he said, "wants to to set the political baseline for the economic argument in the run up to the next general election", in the process setting a test for both the Lib Dems and Labour.

'Long way to go'

In his speech, Mr Osborne warned the welfare budget could not "be protected from further substantial cuts", saying he was beginning "not ending" a debate on the "difficult choices" that he believed had to be made.

Only by reducing welfare, he suggested, could a future government avoid either spending cuts in areas such as education, "big tax rises", or increased borrowing.

Mr Osborne has argued the savings needed after 2015 can be found entirely from spending cuts, with welfare accounting for about half of the £25bn targeted - the remainder coming from a further squeeze on departmental budgets.

Chart showing borrowing forecasts

Although the chancellor said the government's economic strategy was working, with the deficit down by a third since 2010, he warned that the job of repairing the public finances would take many more years.

"It is too early to say the job is done," he said. "It is not even half done."

The UK, he said, was "borrowing around £100bn a year - and paying half that money a year in interest just to service our debts".


He added: "We've got to make more cuts. That's why 2014 is the year of hard truths - the year when Britain faces a choice.

"Do we say 'the worst is over, back we go to our bad habits of borrowing and spending and living beyond our means and let the next generation pay the bill'?

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The chancellor has on the kind of hair shirt that consumers should perhaps still be wearing, given that they went so spending and borrowing bonkers in the boom years.”

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"Or do we say to ourselves 'yes, because of our plan, things are getting better - but there is still a long way to go and there are big, underlying problems we have to fix in our economy'?"

Asked earlier if some pensioner benefits could be means-tested the chancellor told BBC Radio 4's Today programme the Conservatives' values had not changed, suggesting they would continue to support all pensioners getting things like the winter fuel allowance, irrespective of income.

He said changing universal benefits for pensioners would save only "tens of millions" of pounds.

Issues that he did highlight as possible areas for savings were the payment of housing benefit to people aged under 25 and also people living in council houses while earning more than £65,000 a year.

The government estimates between 11,000 and 21,000 social tenant households have incomes of more than £60,000 a year and should pay a level of rent which "better reflects what they can afford".

Nick Robinson said the amount that could be recouped from well-off council-house dwellers was "not huge".

While housing benefit for under-25s was a larger expense - it costs about £2bn a year - he said it was nowhere near the total savings the chancellor was suggesting.

Graphic of housing benefit

At his monthly news conference, Mr Clegg said the "black hole" in the government's finances needed to be addressed and he fully supported the government's aim of eliminating the structural deficit by 2017-8.

But he said he strongly opposed welfare cuts on a scale set out by Mr Osborne and said his party would set out its own plans in due course to do it in a "fairer way".

Expecting "all future sacrifices [to come] from the working poor who are dependent on welfare" was "unrealistic and unfair", he said.

The plans, he added, showed the Conservatives wanted to "remorselessly pare back the state for ideological reasons" and make "cuts for cuts sake".

Deputy Prime Minister Nick Clegg: "You have to spread the burden as fairly as possible"

Labour say they would match the government's overall spending plans in 2015-6 but would have different priorities from the coalition.

Shadow chancellor Ed Balls said: "George Osborne is desperate to stop talking about the cost-of-living crisis on his watch. But that won't stop working people from doing so as they are on average £1,600 a year worse off under the Tories and prices are still rising faster than wages.

"Nor will the chancellor admit the reason why he is being forced to make more cuts is because his failure on growth and living standards has led to his failure to balance the books by 2015.

"This failure means Labour will have to make cuts and in 2015-16 there will be no more borrowing for day-to-day spending.

"But we will get the deficit down in a fair way, not give tax cuts to millionaires. And we know that the way to mitigate the scale of the cuts needed is to earn and grow our way to higher living standards for all."

The TUC said the level of cuts proposed by Mr Osborne would "cause real pain to hard-working people" but the CBI said the government's strategy of tackling the deficit and boosting growth was "beginning to reap some positive results".

The Institute for Fiscal Studies says the £25bn spending cuts target looks "tough" to achieve, particularly if a future government continues to ringfence spending on the health service and schools in England, as well as protecting pensions.

On Sunday, David Cameron promised older voters the state pension would continue to rise by at least 2.5% a year if the Conservatives won the next election.

How government department budgets have been cut:

Cuts chart
Cuts chart

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  • rate this

    Comment number 1112.

    Lawyers are on strike because of Legal Aid cuts. There is no money to fill potholes, cars and lives are being wrecked. The government and BBC keep up their attack on people at the bottom of society with yet more benefit cuts.

    And we have plenty of money to send soldiers to Afghanistan.

  • rate this

    Comment number 1111.

    Lets have Yorkshire independence vote in 2014 so like the Scots we can get away from the elitist Tories and their destructive policies.

  • rate this

    Comment number 1110.

    1068.chiptheduck - "I've got ways you can save Ossie.......6 Halve the BBC's budget........"

    And how will that help when the BBC's income comes all but exclusively from two sources....

    ...the license fee (paid direct by customers, not through Govt.) & fees from selling shows abroad..... don't really understand economics do you.....?????


  • rate this

    Comment number 1109.

    1005 Adam: What world are you living in? Most teen mothers that I know live with their parents if they can, the only under 25 parents I can think of living separately either already lived away from home because their parents had basically cut them off (which happens from time to time) or were already working. A lot of that £2 billion is for supporting workers on too low a wage to affort rent.

  • rate this

    Comment number 1108.

    "We have a system that increasingly taxes work and subsidizes nonwork... If the only motive was to help people who could not afford education, advocates of government involvement would have simply proposed tuition subsidies."- Milton Friedman

    The same could be said for health, transport, or any other state program. More than freeing us, our welfare state is about controlling us, at our expense.

  • rate this

    Comment number 1107.

    Shame we have to keep having different pictures of this smug, out of touch toff. The story is bad enough so no pictures of him please. Everything that comes out of his mouth is hypocritical claptrap anyway.

  • rate this

    Comment number 1106.

    VAT Man and The Boy Blunder strike again. I think people have had enough George, don't you?

  • rate this

    Comment number 1105.

    Perhaps if Labour hadn't screwed up the economy in the first place we would not be in this mess. Saying that, I will never vote Tory, Labour or Lib Dems. In fact, I don't bother voting at all. I cant see the point as none of the parties are worth the effort. We are controlled by Europe and we are not allowed to look after ourselves. Will vote again when we are out of Europe.

  • rate this

    Comment number 1104.

    "What we need is Labour's plan to earn our way to higher living standards for all, tackle the cost-of-living crisis and get the deficit down in a fairer way."

    Question for the shadow chief secretary to the Treasury Chris Leslie.How will this be achieved Mr Leslie? Light on detail as always.

  • rate this

    Comment number 1103.

    What you fail to realise wobblycogs (1083) is that the 'old vote' has paid taxes for decades in a number of welfare schemes whilst the young have not. Support for the young needs to come from other sources - better education and private sector employers. And dare I say, the 'young' need to buck up and get on with it, just as your grandparents did in WW2!

  • rate this

    Comment number 1102.

    Here's a start:

    Refuse 11% pay rise.
    Scrap HS2.
    Scrap financial aid to countries that seem to be able to afford their own aircraft carriers and space program.

  • rate this

    Comment number 1101.

    We could easily clear the deficit of this country simply by just not paying anymore into the EU coffers which we do NOT legally belong to anyway. Edward Heath illegally signed us up to this in 1973 & he had no legal right to do so, he committed treason by signing those documents & taking away the sovereign power of the people of the United Kingdom.

  • rate this

    Comment number 1100.

    I have to totally agree with the excellent post written by 'Fed up Taxpayer'

    "No mention of the billions we give away to foreign countries every year, the billions spent being the worlds' health service and social security hub. Come on in, it's lovely unless your hardworking taxpayer or retired worker...I even read that we given Argentina £2 million a year. Country's a laughing stock."

  • rate this

    Comment number 1099.

    Though in monetary terms more could be gained from focusing on Tax avoiders rather than benefit cheats, there are many reasons to target benefit cheats (though of course the Tax avoiders should be targeted aswell).

    The slack nature of the benefit system, in stark contrast to its intended purpose allows it to be abused by Britain's own lazy, but worse, by some who come from abroad to exploit.

  • rate this

    Comment number 1098.

    the pike
    1 Minute ago

    Don't know what people are complaining about, we all signed up to capitalism.

    What an obnoxious thing to say. Most of us were BORN into this and had no choice - some of us are unhappy as to what capitalism is doing to us / for us.

    I never signed up to anything, and to be quite frank, if this is the best capitalism can do I'll be glad when I'm gone.

  • rate this

    Comment number 1097.

    why not cut down on the number of MP's there are, that would provide a huge amount of extra money for already struggling services

  • rate this

    Comment number 1096.

    I'm reading this report whilst an advert keeps flashing on my screen, saying "The End of Britain". I gotta say, something is terribly wrong here. Have you seen this one coming, Mr Preston and Mr Robinson..?

  • rate this

    Comment number 1095.

    As the long trudge back to work starts today.may we take time to reflect on the poor plight of our Royals..who can remember our Monarch pleading the case for her poor subjects in her Xmas speech ??..And what are they to do..after Xmas at begins the long trek to Klosters.and then off to sunnier climes in the Caribbean.folks should remember ..A royal family is for life.not just Xmas

  • rate this

    Comment number 1094.

    So far in the Tory attack on Britain's young:

    Increase Uni fees to £9k
    Remove 'in education' payments for 6th formers & going to college
    Remove out of work payments for under 18's whilst doing nothing to increase employment
    Remove housing benefit whilst doing nothing to cap rents

    This only leaves increasing the voting age to 25 for their alienation to be complete.

    Job done Mr Cameron.

  • Comment number 1093.

    This comment was removed because the moderators found it broke the house rules. Explain.


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