Welfare cap puts Labour on spot

Chancellor George Osborne had previously signalled the intention to set a “welfare cap” and yesterday he put the first limit at £119.5bn for the first year of the next parliament.

Mr Osborne has already said he wants to see £12bn more sliced off the welfare bill in the two years following the May 2015 General Election, and aides signalled that this will give him scope to create “clear blue water” from the other parties by making a manifesto pledge to cut the cap.

It will put the other parties under pressure to match or better the Tories or risk being portrayed as “soft” on benefits and not willing to take the tough choices needed to keep public spending under control.

Mr Osborne told MPs: “Britain should always be proud of having a welfare system that helps those most in need. But never again should we allow its costs to spiral out of control and its incentives to become so distorted that it pays not to work.

“In future, any government that wants to spend more on benefits will have to be honest with the public about the costs, need the approval of Parliament, and will be held to account by this permanent cap on welfare.”

The move is widely seen as an effort to set a trap for Labour which has already promised to reverse the so-called “bedroom tax” which sees people receive less housing benefit if they are judged to have a spare bedroom.

Some estimates put the cost of that pledge at £450m but Labour insists the actual figure will be much lower because it costs so much to administer and, it argues, recoups relatively small amounts.

Shadow Chancellor Ed Balls confirmed the party’s MPs will vote for the cap in the Commons next week.

“We’ve supported the idea of a welfare cap.

“We have said that we should keep out the basic pension but include pensioner benefits,” he said. Clearly, we will do things differently from the Government. For example we have said we will abolish the bedroom tax, we’ve shown how we will pay for that. We actually think our measures on housing and on young people and jobs can get the wider bill down.

“We’ll do things in a fairer way, but the idea of a welfare cap was proposed by Ed Miliband and we’ll support it next Wednesday.”

But the Chancellor’s announcement was met with concern from children’s charities.

Alison Garnham, chief executive of the Child Poverty Action Group, said: “Announcing a cap for social security spending without a plan to address the root causes of low pay, high rents and high childcare costs simply forces the most vulnerable in society to pay the price for inaction.”

William Higham, the director of UK poverty at the Save the Children charity, added: “If the welfare cap is mishandled and pushes low-income families further into poverty, it risks children’s life chances.”

Birmingham University professor of social policy Karen Rowlingson said the idea that welfare spending had spiralled out of control was a “myth”.