Popular support for Britain’s welfare system will be lost unless major reforms are introduced, George Osborne said as he rejected calls to water down his plans to impose cuts on tax credits for low-income earners.
In a defiant response to compassionate Tories who have questioned his approach, led by the former minister David Willetts, the chancellor insisted that the plans – which will go ahead after being approved by parliament – are the “right deal” for Britain.
Osborne insisted that his proposals are designed in part to maintain “popular consent” for the welfare system as he made clear that he would not be backing down, despite warnings by the Institute for Fiscal Studies that 3 million families would lose £1,000 a year.
In an interview with the editor-in-chief of the Guardian, Katharine Viner, at the Tory conference, the chancellor said: “Our plan is the right plan. It’s passed through parliament, it is now going to be implemented. It is the right deal for our country, it is the right settlement for our country.
“Why is it – the Guardian, by the way, has been one of the most powerful critics of it – why is it that we live in a low-wage, high-welfare economy when we should be living in a low-welfare, high-wage economy. That is what we are determined to achieve the transition to.”
Osborne added: “I am actually seeking to, in all the changes we have made on welfare, make sure that we retain popular consent for our welfare system. The truth is that there were such abuses in our welfare system that people had become completely disillusioned with it.”
The chancellor sought to explain the wider thinking behind the government’s plans, which will see the welfare budget cut by a further £12bn, in the interview with Viner, in which he:
• Admitted that he found himself in “a bit of a hole” in 2012, the year that saw him criticised for his so-called Omnishambles budget and humiliated as he was booed at the Paralympics. The chancellor said: “I’d got myself into a position which I think happens to politicians where I was like: ‘Well OK, people don’t like what I’m doing, but tough, I’m just going to get on with it and I’m not going to bother explaining it.’ I retreated into the Treasury which you can do in this job ... So I had got myself into a bit of a hole actually and I sort of decided by the end of that year: look, I am taking these decisions, they are of course having an impact on people, I’ve got a duty to try and get out there and explain what I am doing.”
• Confirmed that Boris Johnson is on course to be given a full cabinet post when he stands down as mayor of London next year. Osborne said of Johnson, who is currently a member of David Cameron’s political cabinet without a ministerial post, said: “Obviously it is David Cameron’s decision who forms the government but I would be very surprised if Boris Johnson wasn’t part of it.”
• Brushed off questions about his own leadership ambitions by saying he is focused on his job as chancellor. He lavished praise on Cameron as one of Britain’s political giants for becoming the first prime minister in 150 years to increase their party’s share of votes and seats after a full term in office: “Think of all the political greats of this party in the 20th century and indeed the great Labour political leaders who won elections – David Cameron beat them all. He has a mandate to lead and a mandate to govern and we are all part of his team for this parliament.”
• Said Jeremy Corbyn is so far out of the mainstream that he will remain a fringe leader for five years. “That party has decided to abandon the centre ground, head off to the fringes. [Corbyn] came to speak at a fringe here yesterday, metaphorically he is going to be at a fringe meeting for the next five years as far as I can see.”
Osborne sought to make clear that his welfare reforms would be fair as he insisted that nine out of 10 families would be better off if the whole package of measures is taken together. He cited the new “national living wage”, due to rise to £9 an hour for those over the age of 25 by 2020, the personal allowance which will deliver £1,000 for people on low to middle incomes, and free childcare for three- and four-year-olds. He said: “Take the package as a whole and it is a package that hugely supports working families.”
Paul Johnson, the director of the Institute for Fiscal Studies, has said it was “arithmetically impossible” for the increase in the minimum wage to compensate for the loss in tax credits. In its post-budget briefing, the IFS said 13 million families would lose an average of £240 a year, while 3 million families would lose £1,000 a year.
The Tory leadership has faced pressure from the compassionate Conservative wing of the party over the chancellor’s plans. Willetts, the former science minister, warned of a “sour taste” after Osborne announced that he would slash the earnings level at which tax credits start to be withdrawn from £6,420 to £3,850 from next April. Boris Johnson also used his party conference speech to signal he wants to see greater protection for workers on tax credits.
