POLITICS
16/07/2013 04:31 BST | Updated 16/07/2013 07:24 BST

George Osborne Plots Further Cuts To Benefit Payments

AP
George Osborne is plotting a further crackdown on benefits, it has been reported

George Osborne may consider a reduction in the new £500-a-week cap on benefits if it proves effective in reducing the welfare bill and encouraging work.

The controversial annual limit on total household income from a range of benefits was introduced yesterday at the level of the average salary of £26,000, amid claims that it will force many families into hardship.

But The Times reported that Conservative MPs want it cut further to £20,000 as part of an assault on welfare spending if Tories win the 2015 general election.

The move would open up a political dividing line with Liberal Democrat coalition partners, who have acted as a brake on Tory ambitions to slash back the welfare state.

An aide confirmed that Osborne had received representations on lowering the cap, adding: "We want to see how the policy beds in. But clearly over time, lowering the cap is an option."

Work and Pensions Secretary Iain Duncan Smith has already floated the idea of limiting child benefit to two children for jobless households and stopping housing benefit for under-25s who could live with their parents.

Backbench Tories argue that the £26,000 cap is still higher than the average wage, because workers would have to earn £35,000 before taking home that much after tax. They calculate that a cut to £20,000 could save a further £840 million a year.

Braintree MP Brooks Newmark, a Tory member of the Commons Treasury Committee, told The Times: "I think many people would be in favour of bringing it down to the real average post-tax pay. I can't see Essex Man complaining if that happened."

And Kingswood MP Chris Skidmore said: "It is absolutely right that we have this cap in place. It is one of the best policies we have in place at the moment.

"But the cap remains very high at a time when many people are working and earning less than that. In the longer term, a cap of £20,000 would better reflect average wages."

Duncan Smith yesterday said a "very, very significant number" of people had found work in affected households within the four London boroughs where the cap has already been implemented.

"The key principle behind this all over the country is that those who work, those who are trying to do the best in their households, do not see others who are down the road, who are on benefits, on welfare, actually getting more than they do," he said.

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But he got embroiled in a spat with John Humphrys in a Radio 4 interview, when the Today presenter challenged him over comments by the leader of Haringey Council - where the scheme has been piloted - who said that 740 families in the borough had been severely financially disadvantaged by the cap but only 34 family members had found work.

"What you are doing - as always happens in the BBC - you are seeking out lots of little cases from people who are politically motivated to say that this is wrong," said Duncan Smith.

Matthew Reed, chief executive of the Children's Society, accused the Government of trying to use a "blunt instrument" to solve a complex problem.

"The debate around this cap has focused solely on workless adults, but the reality is that children are seven times more likely than adults to lose out," he said.

Reed said 140,000 children, compared with 60,000 adults, "will pay the price as parents have less to spend on food, clothing and rent".

Conservative party chairman Grant Shapps insisted further radical reforms were being considered, including capping child-related benefits for unemployed parents at two children.

Child benefit, income support or tax credits could be withheld for the extra children under the plan, Shapps told the Daily Mail.

In another proposal, under-25s who are unemployed should be denied housing benefit so they continue to live with their parents for longer, the minister said.

"Welfare should not be a way of life," Shapps told the Mail.

"If you are a working family and you have another child, you know it's going to mean quite a severe impact on your living costs. Yet in the welfare system, it's almost turned on its head so additional children are actually recognised, with no limit."

Addressing the housing benefit proposal, he added: "A young person who's out of work is given an advantage over a young person who's in work when it comes to moving away from their parents because of housing benefit.

"So there's a bizarre incentive which means if you're not in work you can more easily move out and get your own place. That is a matter of basic fairness."