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George Osborne: Tories will slash welfare state by ‘billions’

Friday, December 13, 2013 7:35
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George Osborne during a visit to JCB's backhoe loader factory in Rocester, Staffordshire

George Osborne said a future Tory government would slash welfare by billions Photo: PA

A future Conservative government will slash the welfare state by “billions” to protect schools, hospitals and investment in science from further cuts, the Chancellor has said.

Mr Osborne hinted he is prepared to further lower the £26,000 cap on the amount households can receive in benefits, in a move likely to put the Tories in conflict with their Coalition partners.

He said he expected any cuts to the benefits cap to be the subject of “fierce debate” ahead of the next election. The Liberal Democrats are satisfied with the current level of the cap.

Mr Osborne told the Treasury select committee: “My view is that welfare expenditure cannot be excluded from the difficult decisions that need to be made, if you want to maintain the same pace of reduction in government spending, then you’re going to have to find billions of welfare savings.”

The Institute for Fiscal Studies has suggested that reductions in welfare half as deep as the Coalition’s controversial changes may be needed or taxes would have to rise.

The think tank calculated that if annual welfare spending is cut by £12billion a year after the election, the extra cuts in departments and services will only have to continue at their current rate.

Mr Osborne said that while he did not accept the figure, he accepted the principle behind it.

He said that in future the government should be “making our investments in schools and in science” instead of welfare because “that’s securing the long-term economic health of this country”.

In his Autumn Statement Mr Osborne set out plans to clear the Government deficit and run a surplus by 2018-19, telling voters that more “difficult decisions” will be needed after the 2015 general election.

He said it was “erroneous” for the Office for Budget Responsibility, the official spending watchdog, to suggest that by 2018 state spending will reach the lowest level since 1948.

He said: “I think that assumption is based on what I think is an erroneous judgment about what the political system would do.

“They’re perfectly right that on the current plans that’s what it shows, but I think the next government will want to undertake more savings in the welfare budget and further welfare savings and if you undertake further welfare savings then you don’t reach that 1948 number.”

Among the measures being considered by Mr Osborne is reducing the £26,000 cap on the amount households can receive in benefits.

He said: “On the benefit cap… it is open to debate and open for future governments to change the level of cap. The level of the benefit cap will continue to be a subject of fierce debate.”

Mr Osborne also faced questioning over the government’s controversial help-to-buy scheme, which critics have suggested will lead to a housing bubble.

Andrew Tyrie, the chairman of the treasury select committee, suggested that the policy was the equivalent of “adding vodka to the punch bowl just as the party gets going”.

Mr Osborne replied that the financial policy committee, the body which will review the scheme on an annual basis, has the power to “take away the punchbowl”.

But Mr Osborne insisted that Help to Buy support was going to the right kinds of households.

“The early evidence from Help to Buy is that three quarters of those taken out are not living in London and the South East,” said the Chancellor. “The average house purchase that they have been looking for is £160,000 – that’s below the national average.

“In other words, it is dealing with exactly the families we want it to help.”

He announced that next year’s Budget will be held on March 19.





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