George Osborne announced a £7 billion hit on the welfare budget today as he took an axe to public spending.
The welfare cuts – on top of the £11 billion announced in the emergency Budget in June – include the axing of child benefit for higher rate taxpayers from 2013, unveiled at the Conservative Party Conference (see the Benefits Check-Up guide).
However, Osborne scotched speculation he is planning to cut child benefit for children over 16, saying it will be paid for some children up to the age of 19.
Other benefits, such as part of the pension credit, have been frozen but the Government has maintained some payouts, such as winter fuel payments, that had been tipped for the chop.
Osborne described the package as "tough but fair".
"Today's the day when Britain steps back from the brink, when we confront the bills from a decade of debt," he said.
"To back down now and abandon our plans would be the road to economic ruin. We will stick to the course. We will secure our country's stability. We will not take Britain back to the brink of bankruptcy."
Shadow chancellor Alan Johnson accused the Government of taking a "reckless gamble with people's livelihoods" which could wreck the economic recovery.
Other benefits-related announcements include:
- Freezing the maximum savings credit part of the Pension Credit benefit for four years. This payment, currently up to £20.52 a week extra for a single person or £27.09 for a couple, is paid to those over 65 with modest incomes and savings.
- Freezing the basic and 30-hour (for those who work over 30 hours) elements of tax credits for three years and from 2012 changing the working tax credit rules so couples with children must work 24 hours per week between them, with at least one working 16 hours.
- The child element of the child tax credit will rise by £30 in 2011/12 and £50 in 2012/13 above inflation, meaning annual increases of £180 and then £110 above the level promised by the previous government.
- Universal benefits for pensioners will be retained. These include winter fuel payments, free eye tests, free prescriptions, free bus passes and free TV licences for the over 75s.
- Cold weather payments will be maintained. This gives those on low incomes £25 when the average temperature hits, or is forecast to hit, zero degrees celsius or below over seven consecutive days from November to March.
- Families that don't work will not receive more in benefits than the average family that works. The exceptions are for those who get disability living allowance, working tax credits or the war widows pension.
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