AB 12.45 Has Osborne just announced a “couple penalty” for benefit-reliant families? The cap will poll well — who could argue with a family earning more on benefits than their neighbours earning average household income? The problem is that for a couple with six children, the effective ceiling on their income gives them a pretty strong financial incentive to break up. This is not an issue that will be missed by claimants. The system will effectively pay parents that have “split up” into two households (in reality or in theory) significantly more than those who stay together under one roof. You can imagine that when faced with the prospect of being forced to move the 6-strong family into a house with rent less than £220 a week, this is a serious option to consider.
JP 12:43 One might not usually associate George Osborne with humour; but he had cracked a rather good joke about how well he is working with Vince Cable, the Lib Dem business secretary. “People said we wouldn’t get on, that we’d trade nicknames and knife each other in the back, end each other’s careers? Who do they think we are? Brothers?”
AB 12.37 Just spoke to Ian Mulheirn of the Social Market Foundation, a former Treasury official who is one of the top experts on all these welfare changes.
It sounds like the cap on benefits will be around £500 per week, which amounts to £26,000 a year for the household.
This basically means it targets families with three or more children who are claiming a relatively high level of housing benefit (i.e. they are living in a home in outer London). Ian has worked out that the housing benefit claim needs to be around £220 per week, given the other benefits that are available for children and those out of work.
This basically means that the cap on benefits is another assault on housing benefit, which took a big hit in the emergency budget. The number of people affected adds up to around 200,000, according to Ian. It seems like this will raise significantly less than £1bn, so it is as much about the symbolism as the savings.
JP 12:33 Newsflash on welfare. A limit on the amount of benefits any one family can receive. This is most definitely a new policy. He says that unless they have disabilities, no family should get more living on benefits than the average family gets from going out to work – somewhere in the low 20,000s I would guess. Nick Timmins, our public policy guru, reckons it’s £22k or £23k.
Osborne is being very clear. Living on benefits will no longer be a “lifestyle choice”. But he will continue to preserve help for the disabled, a state pension and so on. It’s a travesty that the housing benefit bill is bigger than government spending on the police, he has argued.
AB 12:29 An interesting line on the limits of efficiency savings. “Even if we managed to become the most efficient government in history it will not be enough”, he said. Makes a welcome change from the Cameron statement pre-election that he would manage to do more with less in public services. Osborne did admittedly go on to make a case for “liberating” public sector workers, which suggested the reforms would make up for the loss of resources. And he didn’t quite go far enough in priming the public to expect some services to be much worse, given the cuts. But it is clear that some of the optimism on what can be achieved through efficiency has been shed through the course of this incredibly difficult spending review.
JP 12:26 Unsurprisingly he has sought to portray Ed Miliband as being in hoc to the trade unions and their “vested interests” – contrasting him with Labour modernisers such as Tony Blair and David Miliband.
He’s also hammering home the point about Britain’s giant debt interest payments, amounting to £120m a day, as Britain pays “interest on interest on interest”. This was money that could have been used to build schools and hospitals, he points out. “How dare Labour call that protecting the poor?!” It is a key argument – and one with merit – that the chancellor will have to make day in, day out for the next year or so as the British public realise the enormous scale of the imminent cuts.
AB 12.22: Osborne’s big challenge is to convince people that there is an upside to a tough austerity plan. It is the counter-factual — the nightmare of the markets bringing Britain’s debt-ridden government to its knees — that he needs to make real for the public. Today he turned to a military analogy. “Our victory is the absence of war. Now together we must win the peace.”
JP: 12.20: Osborne has praised Nick Clegg and Danny Alexander, his new Lib Dem partners. And thanked his entire Treasury team, much as a groom might to at his wedding speech.
He has also warned of the dangers of Portugal, Greece and Ireland, saying that the danger has not passed. Ireland is not an ideal example, however, given that its government embarked on a swift deficit reduction programme which – some argue – has made its economy even worse (the difference was that Ireland is rescuing its banks at the same time as cutting spending….at least in Britain there was a gap of two years between the two).
AB: 12.16 Some familiar riffs so far. A dig at Liam Byrne, the softest of Labour targets. (“Only Labour could have put in charge of the public’s money somebody called Byrne”). And a list of the Labour governments that left the country on “on the verge of bankruptcy”. The big change is in demeanour. Since becoming chancellor Osborne seems to have filled out, and I don’t just mean physically. His words carry more weight but they also seem to be delivered with a bit more punch.
JP: 12:14 The chancellor of the exchequer looks calm under pressure; there is no doubt that he is good at this kind of thing. During the Today programme this morning, when announcing cuts to child benefit – the sort of thing that could infuriate more than a million middle class families – he seemed relaxed and reasonable. Back to the speech: he’s criticising Labour again, for failing to fix the roof when the sun was shining, leaving us to spend £1 out of every government £4 on repaying debts. We’ve heard it before but he has no choice but to remind the nation of the situation.
JP: 12:13 George Osborne has appeared. Gloomy stuff. The last government brought us “to the brink of bankruptcy”. The Tories are going to have to clear up the mess. The imminent spending review will not be a happy moment, he implies. (Although we are told he will pull a rabbit out of the hat at some point during the speech). Britain can still be a “reinvigorated” prosperous nation at the end of the pain, he insists.
JP: 12:12 Sir Stuart Rose, head of Marks & Spencer, was the warm-up act for George Osborne. It’s a high-profile figure to roll out – not least as he has never made a political speech before in his life.
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Jim Pickard
Kiran Stacey