George Osborne launches a vehement defence of the coalition’s benefits shake-up, insisting Britain can no longer afford to reward people who do the “wrong thing”.
The chancellor condemned the old system as “broken”, warning Labour that they were out of step with public opinion on the issue.
He attacked those opposing the measures, dismissing criticism as “ill-informed rubbish” and “shrill headline seeking nonsense”.
Mr Osborne said that the current system had not only become unaffordable, it was also now so complicated that people were better off on the dole rather than going to work – something the government’s reforms were designed to change.
“These vested interests always complain, with depressingly predictable outrage, about every change to a system which is failing. I want to take the argument to them,” he said.
“Because defending every line item of welfare spending isn’t credible in the current economic environment. Because defending benefits that trap people in poverty and penalise work is defending the indefensible.
“The benefit system is broken; it penalises those who try to do the right thing; and the British people badly want it fixed. We agree – and those who don’t are on the wrong side of the British public.”
Responding to George Osborne’s speech, shadow chancellor Ed Balls said millions of families were “paying the price for his economic failure while he gives a huge tax cut to millionaires”.
The intervention comes after 660,000 social housing tenants deemed to have a spare room began to lose an average £14 a week in what critics have dubbed a “bedroom tax”.
Wider welfare and tax changes coming into force this month will see council tax benefit funding cut, and working-age benefits and tax credit rises pegged at 1 per cent – well below inflation – for three years.
Disability living allowance (DLA) is being replaced by the personal independence payment (PIP), while trials are due to begin in four London boroughs of a £500-a-week cap on household benefits, and of the new universal credit system.
Thanks to Morrisons for great visit. Staff in canteen said they’re fed up with benefit system & want change twitter.com/George_Osborneâ?¦
— George Osborne (@George_Osborne) April 2, 2013
Work and Pensions Secretary Iain Duncan Smith said yesterday that the changes were about “fairness”.
But he faces backlash after suggesting that he could get by on £53 a week, as one benefit recipient argued they were having to, rather than his current after-tax income of £1,600 a week.
“If I had to I would,” Mr Duncan Smith told BBC Radio 4’s Today programme.
In the wake of the comment, more than 30,000 people signed a petition on the change.org website, calling for the minister to try surviving on that money for a year.
Speaking at a supermarket distribution centre in Kent today, Mr Osborne refused to be drawn on whether Mr Smith could manage on £53 a week. “I don’t think it’s sensible to reduce this debate to an argument about one individual’s set of circumstances.
“We have a welfare system where there are lots of benefits to people on very low incomes.”
He insisted that nine out of 10 working households will be better off as a result of the welfare and tax changes.
“For too long, we’ve had a system where people who did the right thing – who get up in the morning and work hard – felt penalised for it, while people who did the wrong thing got rewarded for it,” he said.
“That’s wrong… This month we will make work pay.”
In the sterling attack on critics of welfare reform, Mr Osborne added: “Some politicians seem to think we can just wish away Britain’s debt problem. They want to take the cowardly way out, let the debt rise and rise and just dump the costs onto our children to pay off. I don’t think that would be fair. And I don’t think we’d get away with it.”
Shadow Treasury minister Chris Leslie pointed out that the top rate of tax was being cut from 50p to 45p.
“While millionaires get an average £100,000 tax cut this week Institute for Fiscal Studies (IFS) figures show that the average family will be £891 worse off this year because of tax and benefit changes since 2010,” he said.
“And just looking at the new changes this week the poorest 10 per cent are losing £127 while the richest 10 per cent gain 10 times that – £1265. Labour would not be making these deeply unfair choices this week.
Meanwhile, research from the Resolution Foundation said those on lower and middle incomes could lose much of the money from future tax cuts.
As universal credit is based on post-tax income, around two-thirds of the effect of a rise in the tax-free allowance would be offset by a reduction in their benefits. By contrast, better-off families who do not get universal credit would pocket the full amount.
The think-tank’s associate fellow, Donald Hirsch, said: “If the government really wants to help low earning families through tax cuts, it will need to adjust Universal Credit so that they receive at least the same benefit as those higher up the income scale.
“If they fail to do this, tax cuts simply won’t accomplish what they’re intended to.”
Mr Osborne concluded his speech arguing: “Taxpayers don’t think the welfare state works properly anymore. When did this start to happen? When we created a system that encouraged people to stay out of work rather than find a job.”