Benefits cuts but wealthy pensioners will keep bus passes, TV licence and winter fuel payment

Benefits cuts but wealthy pensioners will keep bus passes, TV licence and winter fuel payment

By This Is Money Reporters and Tim Shipman

PUBLISHED: 03:02 EST, 25 June 2012 | UPDATED: 09:33 EST, 25 June 2012

Doubt of the benefits: Prime Minister David Cameron risks Coalition disharmony with his welfare reforms.

Further cuts to welfare will be announced by David Cameron today, with the universal benefits enjoyed by all pensioners protected while jobless families and the young bear the brunt of cost-cutting.

The Prime Minister risks a Coalition row by dismissing calls for better-off pensioners to be stripped of free bus passes, television licences and the winter fuel allowance, instead targeting cuts at families with several children who do not work, and under-25s on housing benefit.

Both Work and Pensions Secretary Iain Duncan Smith and Deputy Prime Minister Nick Clegg have made clear they favour a raid on such benefits for senior citizens.

But Mr Cameron will stress that he is not prepared to renege on his pledge to protect the benefits, made ahead of the 2010 election. In his speech today, he will say: ‘Two years ago I made a promise to the elderly of this country and I am keeping it. I was elected on a mandate to protect those benefits †" so that is what we have done.’

Instead, jobless families could be penalised for having more than three children under the plans. They could also be kicked off  the dole after two years.

The Prime Minister will also float the idea of stripping under-25s of housing benefit. The maximum amount of Housing Benefit a family can claim may also be slashed from the current limit of £25,000 a year. 

Any such proposals would be controversial as a high number of those on housing benefit are in work and not claiming unemployment benefits, but rely on the housing handout to live in otherwise unaffordable areas.

Removing the benefit would force more young people to live with their parents for longer.

Mr Cameron will claim that there is a ‘welfare gap’ in Britain, where those on the dole have a financial incentive to have more children while those in work are forced to stop having children because they simply cannot afford to.

He will float the idea that ou t-of-work parents could be penalised by having their income support slashed and additional child benefit stopped if they have more than three children.

Other measures being considered include forcing the unemployed to work for free in exchange for benefits.

Mr Cameron will say: ‘If you are a single parent living outside London, if you have four children and you’re renting a house on Housing Benefit, then you can claim almost £25,000 a year. That is more than the average take-home pay of a farm worker and nursery nurse put together.

‘We have created a welfare gap in this country â€" between those living long-term in the welfare system and those outside it. This has sent out some incredibly damaging signals. That it pays not to work. That you are owed something for nothing. It created a culture of entitlement.’

He will also suggest that Britain adopts America’s tough benefits rules which see the unemployed forced to work and even automatically stripped of payments after two years out of work.

Haves, and have nots: Elderly people will keep universal benefits.

Stressing the virtues of ‘self reliance’, Mr Cameron will say: ‘Quite simply, we have been encouraging working-age people to have children and not work, when we should be enabling working-age  people to work and have children. So it’s time we asked some serious questions about the signals we send out through the benefits system.

‘Yes, this is difficult territory. But at a time when so many people are struggling, isn’t it right that we ask whether those in the welfare system are faced with the same kinds of decisions that working people have to wrestle with when they have a child?’

Downing Street sources say the Prime Minister will seek to advance this agenda through the Coalition, but the reality is that he will meet fierce resistance from the Lib Dems. Instead, the measures are likely to form the centrepiece of a Tory manifesto at the 2015 election.

In 2010, Culture Secretary Jeremy Hunt provoked a row when he suggested that th e workshy should stop having children if they cannot afford them, saying the number of children is a ‘choice’.

Today Mr Cameron will point out that there are more than 150,000 people who have been claiming Income Support for over a year who have three or more children and 57,000 who have four or more.

It remains unclear, however, exactly what ministers would do to ensure a child did not suffer if he or she was the fourth or fifth born. One idea is to improve school meals and early years education to the point where the less well-off benefit hugely.

Mr Cameron will also cite the experience in America, where people are forced to work for benefits and do not get them indefinitely.

A No 10 source said such ‘time-limiting’ could potentially apply to many benefits. ‘David will say we should look at time limiting benefits. In America they say, “Sorry, you have it for two years and then you’re on your own”.’

In Wisconsin, when benefits claimants were told they would get no handouts after two years on the dole, the number of claims dropped by 57 per cent. When that state introduced ‘workfare’ schemes to ensure claimants did something useful for their benefits, claims dropped by 80 per cent.

Mr Cameron’s decision to float such controversial ideas is likely to lead to claims that he has abandoned the ‘compassionate Conservative’ mantra with which he won power. But he is keen to create clear blue water between the Tories and the Lib Dems as the Coalition enters the second half of the Parliament.

The Lib Dems said they would not support the plans but were content with Mr Cameron floating Tory ideas.

Liam Byrne MP, Labour’s work and pensions spokesman, said: ‘This is a hazy and half-baked plan when we need a serious back-to-work programme for young families.’

VIDEO: No more money! Cameron wants to cut benefits.. . 

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