Isabel Hardman

Lib Dems block further welfare cuts

Lib Dems block further welfare cuts
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One popular prediction swirling around Westminster this morning is that part of the Government's response to the GDP disaster will be to cut more money from the welfare budget. After all, George Osborne told MPs in his Budget statement that there would need to be a further package of £10 billion cuts in welfare spending over the period of the next spending review, and the IMF has made similar noises, too.

But I understand that this is not going to happen because the Liberal Democrats will not let it go through. Sources are emphatic that those at the top - Nick Clegg, Danny Alexander et al - have blocked the £10 billion of cuts for this parliament. 'It's just not going to happen,' says one senior party figure.

One of the reasons it is possible for the party to be so emphatic on this subject is that next year's comprehensive spending review will not go ahead in the traditional sense at least. Newsnight reported recently that Treasury figures felt they were going through the motions on the planning, because it will be near-impossible for either party - but especially the Lib Dems - to go into an election campaign in 2015 wedded to compromised spending plans that their own voters are uncomfortable with. That this was going to happen was plain from the publication of the Coalition Agreement onwards: there is already in black-and-white an agreement that the Liberal Democrats can 'continue to make the case for alternatives' to Trident, which means one chunk of the spending review document has always been in doubt.

How to approach the CSR is still the subject of much discussion. There needs to be some level of agreement, at least on principles, if nothing else. Otherwise the review could contain all sorts of decisions which have only been taken by one party, which would quickly unravel in the weeks to follow, thus spooking the markets. But it's not clear yet where the line will be drawn between agreeing a principle on spending and agreeing the actual detail of spending.

Where the line has been drawn, though, is around those extra welfare cuts. Even if the Treasury decides to bring forward those decisions to this year's autumn statement, the Lib Dems are unlikely to agree to any such package. This is curious because welfare is one of the areas that voters are pushing the government to go further on. Backbench Tories would dearly love to see more action on this area of spending because it is such an easy sell to their constituents. Blocking cuts which are largely popular looks like a gift from the Lib Dems to the Conservatives, who can point out that the Liberal Democrats stopped them going as far as they wanted in government on a key issue.

But it's worth remembering that Iain Duncan Smith is also a fierce opponent of that £10 billion figure. The Work and Pensions Secretary told The Times in April that 'there is in my view no such thing as an easy target in welfare'. It also depends whether voters continue to feel vindictive towards 'scroungers', or are more concerned with the cost of living for themselves by 2015: cutting the benefits of a family down the road does nothing to help someone struggling to pay their heating and food bills, after all. The Lib Dems are taking a gamble and hoping that another £10 billion from the welfare bill would strengthen the 'nasty party' label for the Conservatives more than it weakens their own appeal at the ballot box.