George Osborne to freeze benefits for two years

George Osborne addresses the Conservative party conference. Picture: Getty

The Chancellor told the Conservative conference in Birmingham yesterday that public borrowing was “still dangerously high” and that the job of fixing the economy was not complete.

He said all benefits – except pensions, maternity payments and disability help – would be frozen for two years to save £3.2bn, while a welfare cap would be introduced to limit the amount of benefits a family could receive to £23,000 a year.

Mr Osborne also told his party’s last conference before next year’s general election that he would pursue technology companies such as Google to force them to pay their full share of tax.

Introduced by former business minister Lord Digby Jones as “the man with the plan that worked”, Mr Osborne was cheered as he boasted of the government’s achievements.

He said: “Britain is the fastest-growing, most job-creating, most deficit-reducing of any major advanced economy on earth. Britain, we did this together.”

But he warned more had to be done. He said: “The latest Treasury estimate is that eliminating the deficit requires a further £25bn of permanent public expenditure savings or new taxes.

“And I tell you in all candour that the option of taxing your way out of a deficit no longer exists, if it ever did. The problem for a modern country like Britain is not that it taxes too little – it is that it spends too much.”

Turning to welfare, he said the UK could no longer afford to spend £100bn on benefits for people of working age and that he would save £3.2bn by freezing benefits for two years. These would include Jobseeker’s Allowance, Income Support, Child Tax Credit and Working Tax Credit, Child Benefit and Employment Support Allowance,.

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In addition, he pledged to end youth unemployment with the creation of three million apprenticeships.

He said: “This is the choice Britain needs to take to protect our economic stability and to secure a better future.

“The fairest way to reduce welfare bills is to make sure that benefits are not rising faster than the wages of the taxpayers who are paying for them.”

But he tried to position the Tories as the “progressive party” arguing it was his measures that had tackled zero hours contract abuses and brought people out of poverty by “restoring the true value of the minimum wage”.

Mr Osborne also announced a further £13bn of cuts in Whitehall departmental budgets, except for the NHS and International Development which remain protected.

And he vowed to end the loophole of major companies avoiding British tax by headquartering in countries such as Ireland.

He said: “While we offer some of the lowest business taxes in the world, we expect those taxes to be paid –not avoided.

“Some technology companies go to extraordinary lengths to pay little or no tax here. If you abuse our tax system, you abuse the trust of the British people. And my message to those companies is clear: we will put a stop to it. Low taxes, but low taxes that are paid.”

The Chancellor made a series of personal attacks on Labour leader Ed Miliband, whom he mentioned by name three times.

Mocking the Labour leader’s speech in Manchester last week in which he forgot a section on the UK deficit, Mr Osborne said: “Ed Miliband made a pitch for office that was so forgettable that he forgot it himself.

“But I have to tell you, in all seriousness, that forgetting to talk about the deficit is not just some hapless mistake of an accident prone politician. It is completely and totally a disqualification for the high office he seeks.”

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Mr Osborne won a lengthy standing ovation after telling the conference: “We are eight months away from one of the most important general elections in a generation. We can face it with confidence, for we go to the people as the party of progress. We are going to offer political resolve and economic competence, a confident future for Britain as the most prosperous country in the world.”

But Labour said Mr Osborne’s speech was an admission that he had failed to balance the books.

Chris Leslie, the shadow chief secretary to the Treasury, said: “He is choosing to give the richest 1 per cent a £3bn-a-year tax cut and opposing a mansion tax, while cutting tax credits which make work pay for millions of striving families. While working people have seen their wages fall by £1,600 a year since 2010, the Tories have once again shown they are the party of a privileged few at the top.”

He added: “Labour will balance the books as soon as possible in the next parliament, but we will do so in a fairer way. We will reverse the Tory tax cut for millionaires, stop paying the winter fuel allowance to the richest 5 per cent of pensioners and cap child benefit rises at 1 per cent for two years.”

The SNP described Mr Osborne’s policy announcements as “shameless”.

Kevin Stewart, who sits on Holyrood’s welfare committee, said: “The working poor will be hit hard by Osborne’s freeze on benefits. In Tory Britain, in-work poverty has become a massive problem, with six in ten children living in poverty from households where at least one adult is in work. But instead of recognising the plight of these families, the Chancellor’s plans will punish them and see more people heading to food banks.”

Mr Osborne’s speech reinforced divisions between the Conservatives and their coalition partners.

A senior Liberal Democrat source said: “We have consistently blocked Conservative attempts to freeze benefits for the working age poor, just as they have blocked our attempts to cut benefits for the wealthiest pensioners.

“It speaks volumes about the priorities of the Conservative Party that they see benefit cuts for the working-age poor as a crowd-pleasing punchline for a conference speech.”