08/10/2012 06:36 BST | Updated 08/10/2012 11:28 BST

George Osborne To Make Further Welfare Cuts: Child And Housing Benefits Look Set To Be Targeted

Chancellor George Osborne is to announce plans to slash an extra £10 bn from the welfare budget by 2016-17 at the Conservative Party Conference on Monday.

On top of the £18 billion cuts already under way, child support could be cut for jobless parents who have more than one child and benefit increases could allowed to be lower than the rate of inflation.

Housing benefit for the under-25s also looks set to be targeted. Prime Minister David Cameron has previously said should live with their parents if they cannot afford to fund their own home.

Work and Pensions Secretary Iain Duncan Smith is understood to have initially resisted the cuts proposal, arguing that savings should be found by means-testing benefits such as free bus passes and winter fuel payments for wealthy pensioners.

george osborne

Osborne will say that while the wealthy should contribute most to reducing the state deficit, it is not possible to balance the books "on the wallets of the rich" alone.

But in a joint article on Monday, he and Mr Osborne said they have reached agreement that the savings can be found without touching the universal benefits for pensioners.

"We are both satisfied that this is possible and we will work together to find savings of this scale," they wrote, rejecting the alternative options of cuts to economically-productive spending, higher taxes, or more borrowing and debt.

Mr Osborne will say that a further £16 billion of savings must be found in 2015/16 alone to meet his target of balancing the nation's books within five years, and he will make clear that sums of this magnitude cannot be found simply by increasing taxes on the rich.

Osborne is expected to tell the Conservative Party Conference:

"It’s an economic delusion to think you can balance [the budget] only on the wallets of the rich.

"Let the message from this conference be clear: we will finish the job we have started."

It is wrong to have a welfare state where those who live on benefits can be better off than those who have a job, he will argue.

And he will take on Labour's claim to be fighting for "fairness", arguing that the British people believe it is fair for those who make the greatest efforts to get the greatest rewards.

iain duncan smith

Work and Pensions Secretary Iain Duncan Smith is thought to have resisted the proposals - first floated in Mr Osborne's March Budget

Mr Osborne will say that each of his budgets has increased overall taxes on the very wealthiest. And he will say that - despite the cut in the top rate of income tax from 50p to 45p - the rich will pay a greater share of the UK's total tax revenue in every year of this Parliament than they did in any of Labour's 13 years in office.

In their joint article, Mr Osborne and Mr Duncan Smith gave their backing to a proposal floated by Mr Cameron earlier this year to scrap most of the £1.8 billion in housing benefits - worth an average £90 a week - currently paid to 380,000 under-25s.

Jobless people should face the same choices on what homes and lifestyles they can afford as their contemporaries who are in work, they said.

His announcement will set the Tories on collision course with their Liberal Democrat coalition partners.

Deputy Prime Minister Nick Clegg told his own party's conference last month that he would not allow "wild suggestions" of a £10 bn cut in welfare, while Chief Secretary to the Treasury Danny Alexander told delegates: "We simply will not allow the books to be balanced in a way that hits the poorest hardest."

Both the Chancellor and Prime Minister David Cameron indicated yesterday that the rich will be expected to "pay their fair share" towards deficit reduction, but ruled out the introduction of a "wealth tax" such as the mansion tax on expensive properties favoured by the Lib Dems.

Mr Osborne will attack Labour leader Ed Miliband for failing to mention the deficit in his own conference speech last week, arguing that anyone who is serious about tackling the country's problems must set out the principles they will apply to finding savings to get the deficit down.

Mr Osborne and Mr Duncan Smith also confirmed their commitment to the flagship Universal Credit, which is intended to simplify the welfare system by replacing a raft of different benefits, but has been subjected to growing scepticism about whether it can be delivered as planned.

"We are united in our determination to deliver Universal Credit, the most fundamental reform of our benefits system for a generation, on time and on budget," they wrote.

Mr Osborne will also announce an additional £200 million in state funding for science research, as part of the Government's efforts to inject growth into the British economy, tripling to £300 million the Research Partnership Investment Fund (RPIF), which supports university capital projects and has been heavily over-subscribed since its launch in the Budget.

Universities bidding for the cash must deliver at least double the public funding with contributions from industry or charity, producing a total £1 billion in additional money for science.

Successful projects from the current round of RPIF bidding include:

:: A £92 million National Automotive Innovation Campus at Warwick University, in collaboration with Jaguar Land Rover and Tata Motors, aimed at reducing CO2 emissions and dependency on fossil fuels;

:: A £60 million inter-disciplinary research centre backed by Rolls Royce at Birmingham University;

:: Surrey University working with mobile phone companies to deliver a centre for fifth-generation "5G" mobile communications;

:: Oxford University working with healthcare companies, the Oxford University Hospitals NHS Trust and Cancer Research UK to build a £138 million centre for targeted cancer research;


:: A state-of-the-art materials chemistry research hub in the North West to be developed by Liverpool University working with Unilever.