More benefit cuts are on the way so that key departments can be spared the worst effects of spending cuts, the Government has warned.
Less than a day after announcing an £11 billion package of cuts to the four biggest working-age benefits, George Osborne said that further welfare savings would be sought.
The Chancellor’s warning raised questions over whether the Government was really committed to long-term welfare reform, as Iain Duncan Smith, the Work and Pensions Secretary, has promised, or just sees benefits as an easy bill to cut.
Mr Duncan Smith is working on plans to make work pay, and remove disincentives to work in the benefits system, but Mr Osborne has decided not to wait and to go ahead and make cuts.
Having already taken the axe to benefit rates, and announced more radical cuts to tax credits, housing benefit, child benefit and Disability Living Allowance, Mr Osborne’s only remaining major target is the Employment and Support Allowance (ESA).
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That replaced Incapacity Benefit under Labour and is a long-term allowance for those who find it difficult to work because of illness or disability.
Mike Brewer, senior research economist at the IFS, said Mr Osborne had few other options.
“He is running out of obvious options for cuts. ESA is partly a contributory benefit and it could be that that those claimants stop receiving their payment after six months if they have a partner in work. That would mirror how JSA works and would save between £2 billion and £3 billion,” he said.
However, disability campaigners are already up in arms over the new medical eligibility tests announced yesterday for Disability Living Allowance, designed to cut claims by one fifth and have vowed to fight any further cuts.
Benefit levels across the board were effectively cut by 5 per cent over the next five years after the way annual upratings are calculated was changed.
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From next year, increases will be made in line with the consumer price index rather than the more generous measure of retail prices. That has yielded a saving of £6 billion. Only pensions and the pension credit will be exempt from the new rule.
Having made such a bold move, it is unlikely George Osborne will unleash another round of cuts.
Mr Brewer said the package of cuts announced in the budget reflected the tension between saving money and wider welfare reform to try and make work pay and ensure someone in a job is always better off than on benefits.
“The cuts to tax credits announced make Iain Duncan Smith’s task much harder because they have scaled back the benefits you can get in low paid work. I’m not surprised about that. It was an emergency budget and it was all about saving money, but it has reduced the income of some on low earnings,” he said.