The Chancellor, George Osborne, will use his keynote speech at the Conservative Party Conference in Birmingham to reinforce the government’s commitment to its deficit reduction policy and to set out new ideas to find a further £10 billion in cuts which would take effect in 2016, after this parliamentary term.
Mr Osborne is expected to present new ideas to cut the cost of benefits such as through removing the rights of parents who do not work to receive an increase in child benefit if they have more children.
Mr Osborne is also likely to set out rules limiting the amount of housing benefit under 25’s can receive. This will mean unemployed young people, of which there are a record number, will have to live at home with their parents.
On top of this the welfare bill will be cut by limiting increases to lower than the rate of inflation and possible further cuts to child tax credits. The government believes targeting the welfare bill will be a potential vote-winner amongst the middle classes.
However, a tax on expensive properties, such as a Mansion Tax, supported by the Liberal Democrats is unlikely to be part of the Chancellor’s armoury.
The Chancellor set out £18 billion worth of benefit cuts two years ago when he set out his comprehensive spending review. The chancellor wants to link in the benefit cuts with the introduction of a new universal credit aimed at simplifying the benefits system.
Despite this, the government has found it difficult to reduce the spending deficit target that it set itself.
Lower tax receipts and higher benefit payments due to the ongoing recession has meant that the government has struggled to lower the deficit.
Its aim was to have the deficit fall as a proportion of GDP during this parliamentary term which concludes in 2015. However, without further cuts and tax rises this will not be possible.
For the 2012-13 tax year its target is for the government to have to borrow no more than £120 billion. Despite a windfall of £28 billion from the Post Office pension funds, it is unlikely to achieve this target.
However, coalition partners, the Liberal Democrats said at their conference that they would not support a further £10 billion in welfare cuts.
Chief Secretary to the Treasury, Danny Alexander, told the Lib Dem Party conference that: "We simply will not allow the books to be balanced in a way that hits the poorest hardest".