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Will the Lib Dems veto welfare cuts?

7 October 2012

1:27 PM

7 October 2012

1:27 PM

If the Lib Dem conference was all about proalition, the Conservatives seem determined to at least start their conference in a less coalicious frame of mind. This morning Chancellor George Osborne made very clear on Murnaghan on Sky News that he would not introduce either a wealth tax or a mansion tax: measures Nick Clegg has called for as the price of the Lib Dems supporting further welfare cuts. Osborne said:

‘I don’t think either of those ideas are the right ones. I don’t think a mansion tax is the right idea because, I tell you, before the election it will be sold to you as a mansion tax and then after the election a lot of the people in Britain are going to wake up and find their more modest homes have suddenly been reclassified as a mansion.

‘So we’re not going to have a new mansion tax, nor do I think it’s sensible to have a wealth tax in the sense of a sort of tax on your wealth levied annually. Other countries have tried that and it hasn’t worked, and it’s driven enterprise and investment abroad.’

He insisted that the rich would be making ‘a contribution to closing the budget deficit’ and that ‘they must bear the greatest share’. But both he and David Cameron, who appeared a little earlier on the Andrew Marr Show, were clear that the Tory side of the government is still eyeing the welfare budget.

To help ministers out, the Free Enterprise Group is this week publishing a pamphlet arguing that jobseeker’s allowance should be cut after six months and again after a year of a claimant remaining on the dole. But though this would make some savings, I suspect Iain Duncan Smith would be deeply unhappy about the idea. It is very similar to a cut that he dropped from the Welfare Reform Bill back in 2011 which docked 10 per cent from the housing benefit payments of anyone who had been on the dole for more than a year. At the time, as well as bowing to concerted pressure from the Lib Dems on the matter, Duncan Smith explained that benefit payments were already going to be cut for anyone who turned down a reasonable job offer, while this cut kicked those who might still be desperately doing everything they could to seek work. He may find himself rehearsing this battle as the Treasury looks for further savings.

Lord Oakeshott, one of the most enthusiastic promoters of the mansion tax, is unsurprisingly cross. He says: ‘Are we in coalition or Conservative government today after they rubbish the mansion tax just passed by circa 300 – 2 at Lib Dem conference? A disastrous own goal by the True Blues: they protect Squeezed Millionaires, not the Squeezed Middle.’

The Lib Dems’ former Treasury spokesman in the Lords also points out that Osborne was originally in favour of the mansion tax, saying: ‘The mansion tax is the only tax Cameron’s rich relatives can’t dodge – that’s why he blocked it in the Budget although Osborne was up for it.’ And he agrees that the £10 billion of welfare cuts are dead in the water, saying ‘as we saw on Lords Reform and boundaries, it takes two to tango in coalition and two not to veto’.

But Osborne’s remarks today haven’t set off a chain reaction of fury from those around Nick Clegg as you might have expected. They were talking tough over the summer about their plan to block the £10 billion of cuts needed to the welfare budget. But one senior party source tells me today that the party could still reach a settlement where welfare cuts go ahead so long as Osborne really is able to offer a credible package which involves the rich paying more.

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