Osborne announces £10bn in welfare cuts

Felix Bramley reports on the Chancellor’s new plan to slash the welfare budget.

As the Government looks to be stalling in their aim of balancing the budget and clearing the public debt by 2016, Chancellor George Osborne has announced measures to cut a further £10 billion from the welfare budget.

Osborne suggested that the cuts would comprise the limiting of housing benefits for under-25s, limiting the number of children in a family who may be supported by benefits and allowing the rate of inflation to exceed increases in benefits – amounting to the likelihood of a gross drop in benefits.

Osborne argued at the Conservative party conference that he could not justify giving flats to unemployed young people when workers twice their age are unable to afford their own property. The national housing federation has expressed their disappointment in such a policy, claiming that it will put many young people at risk of homelessness. Meanwhile, the homeless charity, Crisis, has called the proposals “counter-productive, ill-considered and irresponsible”. The CEO of Crisis argued that “living at home is not an option for young adults who have escaped from violent or difficult homes”.

The idea of limiting the number of children for whom poor families may claim benefits is meant to deter families from having children they can’t afford to support. However in reality, when deciding to have a baby, parents do not always consider financial implications first, if the baby is planned at all. Child Poverty Action Group said the proposals were “abhorrent”, accusing the Chancellor of marking-out children as “second-class citizens” from birth.

By not increasing benefits ahead of inflation, Osborne is allowing benefits to drop in real terms each year – furthering the attack on society’s most vulnerable. This week, opposition leader Ed Miliband has been criticised by Conservatives for attempting to adopt the traditional Conservative mantra; ‘One Nation’. One Nation conservatism, thought up by Conservative Prime Minister Benjamin Disraeli, emphasises paternalism in society, with the rich looking after the poor. Ironically, it appears that Conservative policy is currently as far away from this strand of conservatism as it has ever been.

Despite desperate attempts to bring the budget deficit under control, the Conservative party have ruled out a mansion tax – strongly favoured by their coalition partners the Liberal Democrats. Osborne stated that the budget cannot be balanced “on the wallets of the rich”, after David Cameron vowed not to introduce it on The Andrew Marr Show last week. Both Cameron and Osborne are maintaining, however, that the rich will “pay their share”. Any evidence of this whatsoever remains to be seen.

While the Conservatives are unwilling to back the Lib Dems’ mansion tax, the Lib Dems state that they will not support the proposed £10 billion cuts to welfare. Last month, at the Liberal Democrat Party Conference, Nick Clegg stated that he would not allow the “wild suggestion” of such cuts.

However, as has been proved time and time again, what the Lib Dems claim to want and what they get are often very different things. Surely everyone remembers Clegg’s promises to block rises in tuition fees?

Clegg allowed the welfare budget to be cut by £18 billion at the start of the coalition; a further £10 billion cut would be a further, severe dent to Liberal Democrat confidence in Nick Clegg. As a result, this will be a huge test of Nick Clegg’s leadership. If Clegg does bow down to pressure from his coalition partners once more, the resentment from his party may make his position as party leader untenable.

There is no doubt that the budget deficit must be reduced and the quickest way of doing this is through government spending cuts, but to cut welfare so heavily, just two years after similarly massive cuts to it, is extremely controversial. Conservatives will argue that it is the only way of cutting the deficit without deterring growth through tax hikes for the rich, acting as an economic disincentive for high earners.

However, these cuts prevent UK economic growth too. The expendable income of those on benefits will drop, meaning less money will be spent in the economy, causing a drop in growth. The International Monetary Fund has just announced that it expects the UK economy to shrink by 0.4 per cent this year, a massive drop on the 0.2 per cent growth forecasted in July.

The Conservatives have pointed out that Labour are ignoring the deficit, with Miliband not once mentioning the word ‘deficit’ in his party conference speech. Attempting to deflect attention to the opposition’s failings may be difficult though. The government are expected to announce over the next few weeks that they are currently down on their deficit, borrowing and debt targets, opening them up to even greater levels of scrutiny.

Felix Bramley