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Disability benefits U-turn leaves budget in disarray
Disability benefits U-turn leaves Cameron with £4.4bn to find
(about 3 hours later)
Ministers will entirely cancel £4bn of cuts to disability benefits and no longer have plans to make savings from the welfare budget, Stephen Crabb, the new work and pensions secretary, has said.
David Cameron has been forced to concede that a £4.4bn black hole created by the U-turn over disability benefits will not be filled by further cuts to welfare as he fought to shore up his credibility following the shock resignation of Iain Duncan Smith.
Crabb also acknowledged the government may not have had a sufficiently human approach to welfare cuts in the past, after Iain Duncan Smith resigned from the job on Friday alleging that Downing Street was unfairly targeting the working poor.
The spending climbdown was announced on Monday by Stephen Crabb, the new work and pensions secretary, an hour after Cameron addressed the political crisis engulfing the Conservative party by offering his support to George Osborne and praise for the work of Duncan Smith.
His comments create uncertainty over whether the Conservative pre-election pledge to make £12bn of cuts to the welfare budget will be now met, although Crabb did not specify how long the government would hold off from reducing benefits again.
Aiming to strike a conciliatory tone in the Commons, Cameron said Duncan Smith had “contributed an enormous amount to the work of this government” in his work campaigning for welfare reform, which he said had reduced child and pensioner poverty and inequality.
The trigger for Duncan Smith’s departure was the Treasury’s insistence that cuts of about £1bn a year to disability benefits be rushed out so that they could deliver savings for Wednesday’s budget, which at the same time offered tax cuts for higher earners.
He added that “none of this would be possible if it weren’t for the actions” of his friend Osborne, although the chancellor was not present in the house. Labour MPs repeatedly asked why he had failed to turn up in the House of Commons to sit alongside the prime minister.
George Osborne has not appeared in public to defend his budget, which now has a £4.4bn black hole in its numbers, or rebut the charge of Duncan Smith that he produced a “deeply unfair budget”.
In the debate on the budget that followed Cameron’s remarks, Crabb said his department would drop controversial reforms to personal independence payments (PIP), a disability benefit, adding: “We have no further plans to make welfare savings beyond the very substantial savings legislated for by parliament two weeks ago”.
The statement appeared to indicate that the government was ruling out cuts to the welfare budget for the rest of the parliament, but the Treasury clarified the remarks by stressing that there were no plans to fill the £4.4bn gap caused by dropping PIP reforms with further cuts in welfare spending.
Crabb also revealed that the government would review the level of its welfare cap in the autumn statement. But he added that “it is right that we monitor welfare spending carefully”, arguing that the principle of having “discipline” through a cap was right.
The beleaguered Osborne is due to appear in parliament on Tuesday to defend his work by taking the unusual step of speaking in the debate following last week’s controversial budget, which caused anger on his own backbenches and culminated in the resignation of Duncan Smith.
The former work and pensions secretary had accused Osborne and Cameron of protecting wealthy Tory voting pensioners at the expense of the working poor, while a number of backbench MPs were openly attacking his chancellorship.
Adding to the pressure on Osborne, Boris Johnson, now the frontrunner to become the next Conservative leader, told ITV’s Agenda he believed that the cuts to PIP were a mistake. He added: “I think I have already said very clearly that the government has decided collectively and quite rightly to take the PIP aspect of it [the budget] and try to sort it out.”
Osborne will hit back, and is due to tell MPs: “It is a budget of a compassionate, one-nation Conservative government determined to deliver both social justice and economic security. It’s a budget that puts the next generation first.”
He will also address Duncan Smith directly, claiming that he is sorry he chose to leave government. “[I] want to recognise his achievements in helping to make sure work pays, breaking the old cycles of welfare dependency and ensuring the most vulnerable in our society are protected,” he will say.
Bookmakers further lengthened Osborne’s chances of becoming Tory leader, with new odds being offered on how long he will last as chancellor.
David Davis, the senior Tory MP who ran against Cameron for the leadership in 2005, said Osborne’s hopes of becoming leader of the Conservatives if the prime minister quits in the near future have “sunk without a trace”.
Related: How convincing was David Cameron’s Commons statement? | Rafael Behr, Anne Perkins and Simon Jenkins
Related: How convincing was David Cameron’s Commons statement? | Rafael Behr, Anne Perkins and Simon Jenkins
However, David Cameron defended himself and the chancellor in the Commons on Monday, saying that they run a “modern, compassionate, one-nation government”.
The Tory MP Karen Lumley released a letter that she and colleagues had sent to Osborne before the budget claiming the PIP cuts gave the impression of a “sustained attack on disabled benefits by the government” and could cause long-term damage to its reputation.
Crabb continued in the same tone as he confirmed the cuts to the disability benefit known as the personal independence payment would be totally scrapped, three days after government sources indicated a U-turn was on the way.
While the issue under debate is austerity and whether the government has gone too far in cutting benefits for the poor, the febrile mood on the Tory backbenches has been driven by the fight over Britain’s place in the EU, which is causing the biggest split in the party for two decades.
In his first Commons statement in the job, the cabinet minister paid tribute to Duncan Smith and struck a conciliatory tone for the benefit of Conservative rebels who believe the Treasury’s budget was not fairly balanced.
One cabinet minister told the Guardian that embarking on the referendum was like “pouring petrol” over the party and causing it to “go up in flames”. The minister said that some MPs simple “don’t like the prime minister and never will like him regardless of if he wins elections”.
“Behind every statistic there is a human being and perhaps sometimes in government we forget that,” Crabb said. “After discussing this issue over the weekend with the prime minister and the chancellor we have no further plans to make welfare savings beyond the very substantial savings legislated for by parliament two weeks ago.”
The minister admitted that some politicians in the party wanted to launch a coup against Cameron on 24 June, the day after the referendum. They - and other MPs - said the most dangerous outcome for the prime minister would be a narrow victory for the Remain camp, which could make Brexit supporters feel “like we were robbed”.
Crabb’s comments mean the government is standing by the cuts to the disability benefit known as employment and support allowance for the work-related activity group.
Graham Brady, chair of the 1922 committee of Conservative backbenchers to whom MPs would write if they wanted to trigger a vote of no confidence in Cameron, called for calm. “We know that there are strong passions on both sides of the European debate and it is inevitable there will be tensions and at time the temperature may rise,” he told the Guardian.
He also hinted that the level of the chancellor’s welfare cap could be revised upwards, after Duncan Smith said the figure was “arbitrary” and risked dividing the nation.
“But it is important for the good of the party and credibility of the government that colleagues are careful to be respectful and courteous.”
“The principle of a welfare cap is the right one … We do need that discipline. As we are required to do we will review the level of the cap at the autumn statement as the OBR requires us to do, but I want to repeat that we have no further plans to make welfare savings beyond those legislated for two weeks ago that we are now focused on implementing,” he said.
Responding to the statement, Owen Smith, the shadow work and pensions secretary, welcome the U-turn as a “good start” but pressed him to go further in changing the government’s approach to welfare cuts by scrapping the bedroom tax and ESA cuts.
“Among the many extraordinary truths spoken by his predecessor yesterday was the shameful admission that these two-nation Tories target their cuts on those who they think won’t vote for them,” Smith said. “The new man in post will have to work very hard to wash that stain out.”
Earlier, Cameron lavished praise on Osborne, in his first appearance since civil war broke out in the Conservative party, as he sought to fend off Duncan Smith’s criticism that the nation’s finances are being balanced on the backs of the working poor.
During a statement on last week’s EU summit, Cameron launched into a list of the policies he has implemented that he said were taking children out of poverty and getting more people into jobs.
He said that work was only possible because of Osborne’s stewardship of the economy and pledged to continue on the same path, despite Duncan Smith’s argument that the current balance of austerity risks dividing the nation.
“All of this is driven by a deeply held conviction that everyone in Britain should have the chance to make the most of their lives,” Cameron said.
“None of this would be possible if it wasn’t for the actions of this government and the work of my right honourable friend the chancellor in turning our economy around. We can only improve life chances if our economy is secure and strong.
“Without sound public finances you end up having to raise taxes or make even deeper cuts in spending. You don’t get more opportunity, you get less opportunity that way. We know when that happens it is working people that suffer as we saw in Labour’s recession. We must continue to cut the deficit, control the cost of welfare and live within our means.”
To some cheers from Tory backbenchers, he added: “We must not burden our children and grandchildren with debts we did not have the courage to pay off ourselves. We will continue with this approach in full. We are a modern, compassionate, one-nation Conservative government.”
The chancellor has faced calls from Labour to resign and prompted anger among some Tory backbenchers after he was forced to withdraw planned cuts of £4.4bn to disability benefits.
Osborne, whose leadership chances have been damaged by the fiasco, refused to answer an urgent question in the House of Commons about the unravelling budget figures, sending one of his deputies, David Gauke, instead.
Responding to the prime minister’s defence of his and Osborne’s record, the Labour leader, Jeremy Corbyn, accused Cameron of “covering for his friend”.
“The prime minister is here today. The work and pensions secretary is here today. Practically every cabinet minister is here today. Whatever has happened to the chancellor of the exchequer?” he asked.
Corbyn said the budget had an “enormous hole in it brought about by a temporary retreat on the issue of the personal independence payment”. He said it was the “first time of his memory in parliament that a government’s budget has fallen apart in the space of two days”.
The Labour leader urged Cameron to guarantee there will be no further DWP cuts and condemned the budget for having “inequality as its core”.
