Millions of people deemed unfit to work face cuts in their state handouts after George Osborne said that claimants of incapacity benefit were now in his sights as part of an attempt to reform the welfare state.
The Chancellor signalled that 2.6 million claimants of the benefit would be targeted as part of the “trade-off” between cuts in welfare spending or cuts in frontline services.
Ministers are expected to discuss how to protect those in genuine need while accelerating the testing of those unfit for work when the public expenditure Cabinet committee meets for the first time this week.
“It’s a choice we all face. It’s not a choice that can be ducked,” said Mr Osborne, who is today addressing business leaders at the CEO summit in London, organised by The Times. He added: “Of course we have to look across the piece at the welfare bill and of course we have got to look at individual benefits.”
Mr Osborne unveiled his plans at a meeting of the G20 group of the world’s richest nations in Toronto, where he claimed global backing for Britain’s Budget cuts.
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“Those countries with serious fiscal challenges need to accelerate the pace of consolidation,” the leaders said in a statement at the close of the summit.
The Tory pledge to try to reduce Britain’s annual £12.5 billion incapacity benefit bill represents the latest faultline to emerge between the Conservatives and Liberal Democrats. Many grassroot Lib-Dem members were stunned by the Chancellor’s Budget decision to increase VAT, which they regard as a regressive measure, hitting those on low incomes hardest.
Incapacity benefit, which is worth between £68.95 and £91.40 a week, is paid to individuals under retirement age who are judged to be too ill to work. The length of time claimants have been too ill to work determines their level of benefit. The Chancellor made no mention of incapacity benefit in his emergency Budget this month, although he did announce a strict new test for those claiming Disability Living Allowance. This is a separate tax-free benefit for children and adults who need someone to help to look after them because they are physically or mentally disabled.
It is thought that Mr Osborne was concerned that the Budget would have been perceived as too brutal if he had dealt with both benefits simultaneously. Labour introduced stringent medical tests to determine whether those claiming incapacity benefit were genuinely incapable of working. Early results from the Work Capability Assessment test suggested that as little as a third of claimants, or 400,000 people, were entitled to claim it.
Of 200,000 adults assessed, more than a third were not entitled to claim, another 38 per cent stopped claiming the benefit during the assessment, 11 per cent were found to qualify even though they were capable of some work, while just 5 per cent were too sick to work at all.
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Mr Osborne said yesterday that incapacity benefit would have to be included in the assault on Britain’s £192 billion welfare bill unless spending on schools, the police and other public services was to suffer.
He warned that there would be further tough decisions ahead as the Treasury spends the summer fleshing out spending cuts of up to 30 per cent in some departments.