Monday 20 July 2015 11:50 am

The government's welfare proposals including tax credit cuts and benefit caps is necessary, but more must be done

The chancellor has spoken about what successive governments have known but not properly tackled: the level of welfare spending is not sustainable. Britain is responsible for seven per cent of the world’s welfare spending, despite generating only four per cent of the world’s income and being home to just one per cent of the world’s population.

The one nation Budget wasn't just important because it set out fair and necessary measures to cut our deficit and save taxpayers’ money. It was historic because it radically altered the state’s role in tackling poverty. Labour ministers indiscriminately threw taxpayers money at welfare, instead of tackling the root causes of poverty and focussing on helping the vulnerable.

The result was a welfare bill which rocketed by 60 per cent, record unemployment, and entire households where nobody worked. This government’s approach to welfare is summed up by Iain Duncan-Smith: To "catch you when you fall, and lift you when you can rise." The best route out of poverty is work for all who are able, and help for the vulnerable who can’t.

Read more: George Osborne says emergency July Budget will see £12bn welfare cuts

Two aspects of the Budget underline the government’s one nation credentials. First, the chancellor raised the personal tax allowance threshold again, ensuring that those on low and middle incomes – the aspirational hard-workers who want to get on, and who do the right thing – will pay less tax than they did last year – and on average £800 less per year compared to 2010.

Second, the chancellor pointedly ruled out taxing disability benefits, having increased payments to most disabled individuals during the last parliament. He also provided additional funding for domestic abuse victims and women’s refuge centres. The fruits of our hard-earned economic growth are being used not only to pay off the deficit, but to ease the burden on low and middle income earners, and to protect the most vulnerable.

The government’s policies are working: more people are employed than ever before. The number of unemployed disabled people has fallen by 15 per cent over the past year; meaning 230,000 more disabled people have gained the dignity and value of work for themselves and their families.

Read more: From a new tax-free dividend allowance to the raid on buy-to-let landlords and new inheritance tax rules

But the job is not done and the chancellor must not lose resolve. He should press ahead over the course of this parliament with further reforms to our tax and welfare systems. As the deficit falls he should introduce an employee national insurance contribution allowance – eventually matching it to the income tax allowance threshold. Doing so would lift thousands out of relative poverty, reduce the gap between rich and poor, and provide a sustainable long-term boost to the economy.

By leaving extra money in workers’ pockets the chancellor could make additional reductions to in-work benefits, reducing the welfare bill even further, and allowing more to be spent on the most vulnerable.

The Budget was good, but this one nation government has plenty more to do.