Coalition plans £10 billion benefits cut?

Plans to cut a further £10 billion from social security spending by 2016-17 were signalled by Chancellor of the Exchequer George Osborne in his speech to the Conservative Party conference. These cuts would come on top of the £18 billion savings already announced by the government in 2010. In a joint newspaper article with Iain Duncan Smith, Work and Pensions Secretary, Osborne suggested that steps would be taken to limit the number of children in workless families for whom benefits are paid, and to withdraw housing benefit from young people under 25 who have never worked. Prime Minister David Cameron also specifically referred to housing benefit cuts for young people in his own conference speech a few days later.

However, the Deputy Prime Minister subsequently appeared to cast doubt on whether the cuts were actually part of government policy. Interviewed on BBC Radio 5, Nick Clegg said: 'The idea that... we're just going to scoop out £10 billion from welfare – which will inevitably hit the poorest before asking anything of the wealthiest – no. Flatly no.' He went on: 'I think it's unrealistic to assume that you can't make any more savings from welfare... but it hasn't been agreed in government'.

Commenting on the £10 billion figure, the Institute for Fiscal Studies think-tank points out that the savings would have to be found from the £120 billion of spending that was not 'protected' – that is, excluding pensions and pensions credit. This would amount to a sizeable reduction of 8.3 per cent in the unprotected budget, over and above cuts already planned. The IFS calculates that the suggested cut in young people's housing benefit may save a maximum of £2 billion a year - even assuming it is possible to distinguish between those who can and cannot reasonably be expected to live with their parents, and if the cuts are imposed on young people with dependent children.

Sources: Speech by George Osborne MP (Chancellor of the Exchequer), 8 October 2012 | Daily Mail article, 8 October 2012 | Speech by David Cameron MP (Prime Minister), 10 October 2012 | BBC report, 12 October 2012 | IFS observation, 8 October 2012
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