THE coalition was split last night on the future direction of the UK economy after the Lib Dems reacted angrily to Tory Chancellor George Osborne’s plans to slash spending by another £25 billion after 2015.
In a speech designed to set the agenda for the next general election, Mr Osborne insisted that the welfare system needs to be “permanently smaller” and said 2014 would be the year of “hard choices”.
He warned that the welfare budget alone would need to be slimmed down by £12bn and suggested that housing benefit should not be made available for under-25s or those earning more than £65,000 a year.
But Lib Dem Deputy Prime Minister Nick Clegg accused Mr Osborne of wanting to impose “cuts for cuts’ sake” and warned he would be making a “monumental error” cutting welfare just from the working-age poor.
Speaking in Birmingham, Mr Osborne said substantial benefit cuts were needed to “finish the job” of balancing Britain’s books while avoiding increases in tax.
After a string of positive economic figures on growth, jobs and business confidence, the Chancellor said there was “a real sense that Britain is on the rise”. But he warned that 2014 was “the year of hard truths” and that easing up on austerity would mean squandering what had been achieved and going back to economic ruin.
Throwing down the gauntlet to Labour and the Lib Dems to make clear whether they will back further cuts in the 2015 election campaign, Mr Osborne said he would be putting his economic plans to a vote in the House of Commons later this year.
Mr Osborne said: “Thanks to the hard work of the British people, our economy is on the mend and our country is doing better.
“But what was hard won can be easily lost. So we have a choice in 2014. We can give up, go back to square one, risk everything.
“Or we can confront the hard truth that more difficult decisions are needed – and work through the plan that is turning Britain around. I say, ‘Let’s finish the job’.”
Mr Osborne’s speech came a day after Prime Minister David Cameron promised that a majority Conservative government would maintain the “triple-lock” protection for state pensions.
But the Chancellor made clear that, by contrast, deep cuts can be expected in the rest of the welfare system.
Mr Clegg claimed that Mr Osborne’s speech had more to do with “ideological impulses”.
He said the Chancellor’s intervention revealed a “very different vision” for Britain’s economy from that favoured by Lib Dems.
Labour shadow chancellor Ed Balls, meanwhile, admitted his party would match the Tory plans for cuts but implement them in a way that would encourage growth.
Mr Balls also insisted that Labour would keep the triple-lock pensions guarantee despite doubts being raised by party leader Ed Miliband.
Mr Balls said Mr Osborne was “desperate to stop talking about the cost-of-living crisis on his watch” and would not admit that he was being forced into further cuts by low growth and his failure to balance the books by 2015.
“This failure means Labour will have to make cuts and in 2015-16 there will be no more borrowing for day-to-day spending,” said Mr Balls. “But we will get the deficit down in a fair way, not give tax cuts to millionaires.
“And we know that the way to mitigate the scale of the cuts needed is to earn and grow our way to higher living standards for all.”
SNP Treasury spokesmanStewart Hosie said: “No matter how hard they try to hide it, it is becoming increasingly clear what a No vote means for Scotland: more welfare cuts, more spending cuts and more years of economic mismanagement.”