Middle class benefits set to be slashed as cuts begin

THE Prime Minister yesterday hinted that “middle class” benefits like child support could be scaled back to pay for the biggest overhaul of the welfare state in 40 years.

David Cameron signalled that some universal payouts wouldn’t be “affordable” if the government pursues root-and-branch reform of the benefits system.

Cameron’s comments come after the Treasury gave Ian Duncan Smith, the work and pensions secretary, the green light to announce massive changes to benefits for the unemployed and low-paid in his conference speech today.

Duncan Smith will announce a new “universal credit” to replace the myriad of benefits that are currently available, including housing benefit and jobseekers’ allowance.

Crucially, the credit will eventually be available to those working in low income jobs to ensure they don’t lose out when they move off of benefits and into employment.

But chancellor George Osborne has demanded savings to the overall welfare bill to fund the upfront cost of the proposals, expected to total some £3bn. Although the plans will ultimately lead to a lower claimant count and less fraud, it will be several years before any savings to the £194bn-a-year welfare bill feed through.

Duncan Smith has also agreed to phase in the changes over two parliaments to save on the initial outlay. The unemployed and economically inactive will be moved onto the universal credit in this parliament, while the low-paid will be transferred from 2015 onwards.

The delay will come as a blow for the work and pensions secretary, as the plans are more likely to be shelved if the Tories lose the next election or Duncan Smith is replaced.

Meanwhile, the Treasury has drawn up plans to axe child benefit for parents with children over 16. Currently, the benefit is paid to all parents with children that are 18 or under.

According to internal Treasury projections, scrapping the payment of up to £1,055 for 2m parents with teenagers aged 17 and over could save around £2bn.

Welfare reform has been a major source of tension in the coalition, with the Treasury claiming that Duncan Smith’s plans are unaffordable and undeliverable. But yesterday’s compromise suggests that Osborne and Duncan Smith have buried the hatchet. “Iain had to take George on an intellectual journey and prove that the reforms were affordable,” an aide to Duncan Smith said yesterday.

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