George Osborne announced a real-term cut to benefits as he delivered his Autumn Statement to the Commons on Wednesday afternoon, despite warnings from campaigners that it will "push more families into poverty".
"Those with the most should contribute the most, and they will," he told MPs. "But fairness is also about being fair to the person who leaves home every morning to go out to work and sees their neighbour still asleep, living a life on benefits."
"As well as a tax system where the richest pay their fair share, we have to have a welfare system that is fair to the working people who pay for it.
Osborne said that most working age benefits including Job Seekers Allowance, Employment and Support Allowance and Income Support, Child Tax Credit and the Working Tax Credits would rise below inflation at 1%.
On what had been billed as a difficult day for the chancellor, Osborne had to admit he would miss his target to cut the national debt and that austerity would last until at least 2018, a year longer than he had originally hoped.
Autumn Statement: George Osborne's Key Points
However, recent polling shows that the public largely support measures to cut benefit payments, with only 28% of those asked wanting to see more spending on welfare.
Shadow chancellor Ed Balls said it was not fair to cut jobseekers' allowance while at the same time giving a tax cut to millionaires.
"He’s not just hitting those looking for work. The majority of people who lose from cuts to tax credits are people in work. Millions of families striving hard to do the right thing," he said.
"Let us be clear. The chancellor claims he would cut the welfare bill, but higher inflation and long-term unemployment means benefits bill is forecasts to be billions higher in this parliament than the chancellor boasted."
But the benefit cut will please Tory backbenchers who want to see a crackdown on benefit payments. Former children's minister Tim Loughton told HuffPost UK that it was a "huge mistake to uprate benefits and inline with inflation at a time a when most working people, not least those in the public services, were facing real terms pay freezes, if not cuts in their take home pay."
It has been reported that Osborne’s hopes of freezing benefits completely were blocked by Nick Clegg and the Lib Dems.
And although an all-out freeze was avoided, the below-inflation rise is likely to upset many on the left of the Lib Dems. The Social Liberal Forum (SLF), an internal party pressure group, warned ahead of today’s statement it would find it hard to support “regressive” spending decisions.
The Treasury's own analysis shows that the greatest burden of the cumulative tax and benefit changes will be borne by the bottom three income deciles.
Save the Children said the announcement on benefits "won’t keep pace with increasing living costs and will push more families into poverty and make life far harder for those already there".
Chris Wellings, Save the Children’s Head of UK Policy, said: "Despite the majority of children in poverty having parents in work, this winter many of them will still go without basic essentials – hot meals, decent winter clothing and a warm home to live in - as their parents simply don’t earn enough to make ends meet."
"Despite the Chancellor's tough rhetoric on tax avoiders, it is once again the squashed bottom who will feel the biggest pinch," said Chris Johnes, Oxfam's director of UK poverty. "This fresh round of benefit cuts will pull the rug from under the feet of those already on the edge of destitution."
Reacting to today’s Autumn Statement, Julia Unwin, chief executive of the anti-poverty think tank, the Joseph Rowntree Foundation (JRF), said the government is "giving with one hand, but taking away with the other".
“Investment in infrastructure is welcome and increases in the income tax threshold and scrapping fuel duty rises will make life a little cheaper.
“But snipping at the safety net and reducing the value of benefits at the same time will increase poverty and hardship for the most vulnerable. We’re at risk of consigning the poorest to a decade of destitution.
“The government knows the distinction between ‘striver’ and ‘shirker’ is entirely false. People move on and off benefits: in the last two years, one in six economically active people have claimed jobseekers’ allowance (JSA). So reducing welfare hits people who are doing the right thing and working hard."
An analysis by the Resolution Foundation thinktank suggests that 60% of the impact of the proposed three-year, below-inflation rise in benefits will hit working households while only 40% will affect those where no one is in work. "It’s completely wrong to say that today was all about helping so-called strivers," said the Foundation's chief executive Gavin Kelly.
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