Peter Hoskin

The axe hovers over welfare (and welfare cheats)

The axe hovers over welfare (and welfare cheats)
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As we know, education and defence have now had their budgets settled – another two ticks alongside the checklist. But that still leaves the third member of the coalition's trio of sticky settlements unresolved: welfare. The "quad" of David Cameron, George Osborne, Nick Clegg and Danny Alexander will meet today to bash out the final details. Yet some of their key talking points and decisions have already made it into the papers (especially in this article (£) in the Sunday Times). Here's my round-up, along with brief comments:

1) Crackdown on welfare cheats. George Osborne sets the tone with his article in the News of the World (now also behind a paywall). "A welfare cheat," he writes, "is no different from someone who comes up and robs you in the street. It's your money." And, with that in mind, Lord Freud has sketched out measures which include £50 spot fines for any instance of welfare fraud and a new taskforce of benefit policemen. Tougher action to limit the £5 billion lost to fraud and error each year is not just right – it reinforces the message that money will be targeted at more deserving claimants.

2) The social housing budget cut almost in full. Here's a quick way to save £8 billion, apparently decided on by the coalition: cut the budget for social housing by almost 100 percent. But it's certainly not easy. This, you assume, would put more constraints on the ability of local authorities to house low income earners. And, with 5 million people on the waiting lists for social housing, there are a lot of potential losers.

3) Child benefit withdrawn when children reach 16 (rather than 18). On Marr this morning, Osborne grinned that we "shouldn't necessarily believe what we read in the papers at the moment," when this potential cut came up. But the supposition, in the papers, is that this is going to be discussed at Chequers today. This would affect more claimants, from right across the income spectrum, than last week's child benefit cut (and save twice as much money) – but, if it's introduced, you can expect it to be packaged as yet another attack on the middle classes by the coalition's opponents. To dilute this charge, the government is planning to taper the cuts that come in for higher-rate taxpayers.

4) Winter Fuel Allowance. According with reports from last week, there will be no cuts to Winter Fuel Allowance. The Sunday Times reports that, "Cameron rejected Lib Dem demands to limit pensioners’ winter fuel allowance, which all pensioners receive regardless of income. The Lib Dems wanted to limit it by age or income." This decision is a mistake, and not least because it goes against the arguments that the Tories are deploying about child benefit. As Osborne said in his conference speech, "It is very difficult to justify taxing people on low income to pay for the child benefit of those earning so much more than them” – so how can it be justified in the case of Winter Fuel Allowance, where 82 percent of the payments go towards people who are not in fuel poverty? No doubt there will be a case study in the papers soon of a managing director who blows his £250 on Christmas presents each year.

Welfare will, I'm sure, be the toughest battleground for the government over this Parliament. The size of its budget means that difficult and politically toxic cuts are a necessity – and Cameron and Clegg will reap the whirlwind. The trick will be in demonstrating that the pain is spread fairly; that there is a reason for hitting higher income earners, and that cheats are being hit even harder. That task will be made appreciably easier if IDS's important reforms show some sort of progress before the next election.