Welfare cuts in Osborne's spending review

20 October 2010

Rewarding workers and stressing fairness were two key themes of Chancellor George Osborne’s spending review earlier today.

Osborne said more than once “those with the broadest shoulders should bear the greatest burden.”

Social care:

An extra £2 billion funding for social care, will go towards protecting the most vulnerable with extra money going towards joint NHS and local council care for the elderly.

The chancellor also called for a reform to the social housing system, given that waiting lists have shot up and over half a million social rented properties have been lost over the last 10 years. 

Around 150,000 new affordable homes will be built in the next few years with fewer restrictions on builders and a New Homes bonus scheme will be launched to encourage builders to construct more properties while social tenants will pay rent at 80% of the market rate.

However, it is not enough, according to Campbell Robb, chief executive of housing charity Shelter. 

"The proposed figure of up to 150,000 affordable homes over four years represent less than a third of what this country urgently requires to bring the housing system from its knees, notwithstanding the half a million ‘lost' homes referenced by the chancellor himself.”


Osborne also acknowledged that public sector pensions needed to be addressed, to make them more affordable. When they were first established in the 1950s, taxpayers made half the contributions but now they are paying up to two thirds of public sector pension pots. 

Referring to Lord Hutton’s report on public sector pensions, Osborne agreed that an increase in employee contributions is essential and that it should be staggered.

He said: “That means the lower paid – and those in armed forces – are protected and the highest paid public servants, who get the largest benefits, pay the highest contributions.”

The coalition government will await the full commission report next spring before coming to any conclusions.

The Welfare System: 

With welfare spending now accounting for one third of all spending, the chancellor was keen to stress that “it will always pay to work.”

In what he called “the greatest reform of our generation”, £2 billion worth of funds will be allocated towards a single Universal Credit that will replace all existing working age benefits and tax credits over the next two parliaments. 

The age threshold for the shared room rate in housing benefit will increase from 25 to 35, to reflect the housing expectations of people of a similar age, not on benefits.

Local authorities will see their budgets reduced by 10% from April 2013 but they will have more control over council tax benefit. 

To limit the amount of means testing the maximum savings credit award in pension credit will be frozen for four years.

The basic and 30 hour elements of tax credits will be frozen for the next three years and eligibility rules on working tax credits will change so that couples with children must work 24 hours between them. 

The childcare element of working tax credit will also return to its previous 70% level. The new caps on benefits means that a non–working family on benefits will never earn more than the average working family. 

Osborne called the government’s announcements on tax benefits and credits a “tough but fair deal, ” and pointed out that these measures will collectively save the country £7 billion a year.  

Child benefit:

Following recent government plans to scrap child benefit for higher rate taxpayers, the chancellor announced that this would still stand, saving the UK £2.5 billion; however, he also announced that the child element of the child tax credit will increase by a further £30 in 2011-12 and £50 in 2012-13 above indexation. 


Pensioners will continue to receive their universal benefits in the form of winter fuel payments, free eye tests, prescriptions, bus passes and TV licences for the over–75s. 

Saying cold weather payments should be “for life, not just for elections” Osborne announced that the temporary increase introduced by the previous Labour government, would become a permanent one. 





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