UK

George Osborne Defends Benefit Reforms As Iain Duncan Smith Faces '£53 Per Week' Backlash

02/04/2013 06:20 BST | Updated 01/06/2013 10:12 BST

George Osborne will mount an uncompromising defence of the coalition's controversial benefits shake-up today, insisting Britain can no longer afford to reward people who do the "wrong thing".

The Chancellor is to condemn the old system as "broken", warning Labour that they are out of step with public opinion on the issue.

The intervention comes after 660,000 social housing tenants deemed to have a spare room began to lose an average £14 a week in what critics have dubbed a "bedroom tax".

Wider welfare and tax changes coming into force this month will also see council tax benefit funding cut, and working-age benefits and tax credit rises pegged at 1% - well below inflation - for three years.

Disability living allowance (DLA) is being replaced by the personal independence payment (PIP), while trials are due to begin in four London boroughs of a £500-a-week cap on household benefits, and of the new Universal Credit system.

Work and Pensions Secretary Iain Duncan Smith said today that the changes were about "fairness".

But he was also facing a backlash after suggesting that he could get by on £53 a week, as one benefit recipient argued they were having to, rather than his current after-tax income of £1,600 a week.

"If I had to I would," Mr Duncan Smith told BBC Radio 4's Today programme.

In the wake of the comment, more than 30,000 people signed a petition on the change.org website, calling for the minister to try surviving on that money for a year.

Speaking at a supermarket in Kent today, Mr Osborne will insist that nine out of 10 working households will be better off as a result of the welfare and tax changes.

"For too long, we've had a system where people who did the right thing - who get up in the morning and work hard - felt penalised for it, while people who did the wrong thing got rewarded for it," he will say.

"That's wrong... This month we will make work pay."

Mr Osborne will dismiss "depressingly predictable outrage" about reforms, saying he wants to "take the argument" to critics.

"Because defending every line item of welfare spending isn't credible in the current economic environment," he is to say.

"Because defending benefits that trap people in poverty and penalise work is defending the indefensible.

"The benefit system is broken; it penalises those who try to do the right thing; and the British people badly want it fixed.

"We agree - and those who don't are on the wrong side of the British public."

But shadow Treasury minister Chris Leslie pointed out that the top rate of tax was being cut from 50p to 45p.

"While millionaires get an average £100,000 tax cut this week Institute for Fiscal Studies (IFS) figures show that the average family will be £891 worse off this year because of tax and benefit changes since 2010," he said.

"And just looking at the new changes this week the poorest 10% are losing £127 while the richest 10% gain 10 times that - £1265. Labour would not be making these deeply unfair choices this week.

"The benefits bill is rising under this Government because our economy is flatlining, prices are rising faster than wages and unemployment is high.

"And it is this Government's cuts to tax credits which have left thousands of working parents better off if they quit their job.

"The best way to get the benefits bill down is to get our economy growing strongly and get people back to work."

Meanwhile, research from the Resolution Foundation said those on lower and middle incomes could lose much of the money from future tax cuts.

As Universal Credit is based on post-tax income, around two-thirds of the effect of a rise in the tax-free allowance would be offset by a reduction in their benefits. By contrast, better-off families who do not get Universal Credit would pocket the full amount.

The think-tank's associate fellow, Donald Hirsch, said: "If the Government really wants to help low earning families through tax cuts, it will need to adjust Universal Credit so that they receive at least the same benefit as those higher up the income scale.

"If they fail to do this, tax cuts simply won't accomplish what they're intended to."