Ministers consider cuts to winter fuel allowance

Coalition nears its 100th day in office with tensions rising in Westminster over reductions in benefits for the elderly

(AFP)

Benefits for the elderly, including the winter fuel allowance and free bus travel, are being targeted by ministers in the hunt for spending cuts.

The Government is also considering whether to scrap child benefit payments to better-off families to help fund an overhaul of the welfare state.

As ministers grapple with politically unpalatable decisions, George Osborne, the Chancellor, said that the coalition's actions would help to build a "fairer" Britain. And Nick Clegg, the Deputy Prime Minister, will this morning try to reassure voters that the coalition is about more than cuts by promising to boost the prospects of youngsters from the most disadvantaged families.

But, as the Coalition reaches its 100th day in office today, the need to agree huge savings has sent tensions soaring between Cabinet colleagues.

The biggest flashpoint is between the Department for Work and Pensions and the Treasury over where the axe will fall on the benefits bill. Iain Duncan Smith, the Work and Pensions Secretary, has been told by Mr Osborne that he must identify further deep savings in his budget if he is to realise his ambition of fundamentally reforming welfare.

Mr Duncan Smith's problem is that redesigning the benefits system to make it simpler will cost up to an estimated £3bn. The Chancellor has told him to identify savings of £13bn, on top of benefit cuts already announced in the Budget, to justify the expenditure.

Mr Duncan Smith is considering ways of limiting winter fuel allowances for older people, which last year were £250 per household, or £400 where at least one partner is 80 years old.

Critics say the £2.7bn bill is impossible to defend – particularly as many middle-class pensioners use it as an annual windfall once they reach the age of 60.

One possibility is raising the qualification age to 75, the same age that free television licences are issued. Alternatively, winter fuel allowances could cease to be paid to over-60s and instead targeted only at the worst-off pensioners.

Ministers are also examining the £1bn-plus cost of providing free off-peak travel from the age of 60.

The qualification age could be raised to 65 or 70 or the benefit could be means-tested under proposals being studied by the DWP. Restricting benefits to older people would embarrass David Cameron, who before the election denounced as "lies" claims that the Tories planned to cut them.

Mr Osborne said yesterday: "The commitment on the winter fuel payments is there in the coalition agreement and was made during the election campaign and is there for all to see." However, the agreement promises only that the Coalition will "protect key benefits for older people", and fails to rule out restricting the number of people who qualify for them.

Mr Duncan Smith is also known to be sceptical about the merits of retaining child benefit as a universal entitlement. Restricting it to less well-off families could save £5bn, but provoke a backlash from middle-class voters. Mr Osborne has warned that means-testing the benefit would mean setting up a "massively complex new system".

The Chancellor said yesterday that the decisions in the spending review, to be announced on 20 October, would "lay the foundations for future growth and for a fairer society".

Health

Policies

* GPs to take control of 70 per cent of £100bn NHS budget.

* Patients free to register with any GP, hospital or consultant.

* Primary care trusts abolished.

* NHS trusts to become foundation trusts in three years.

* Management costs to be reduced by 45 per cent.

Will they work?

Andrew Lansley's plans for a huge devolution of power from the Department of Health to GPs and patients caught the NHS by surprise when they were announced in July, weeks after the Coalition Government declared that no major reform was planned for the NHS.

Having served six years as opposition health spokesman, Mr Lansley was not about to twiddle his thumbs in office. He is seeking to complete the reforms started 20 years ago by Margaret Thatcher which sought to separate the purchasing of care from its provision.

Care will continue to be paid for by the state but the NHS will be run as a market with a range of providers – NHS, private and charitable – to stimulate competition and innovation. The plan is high risk. Will GPs, trained to look after patients, want to take on the commissioning of hospital and community care? Will they, in their consortia, be up to the task of managing 70 per cent of the NHS budget by 2013? Are all hospitals capable of becoming foundation trusts when at least two dozen big hospitals have never been financially viable? All this has to be achieved while squeezing £20bn-worth of extra services out of existing resources. It is going to be a rocky ride.

Jeremy Laurance, Health Editor

Radical rating (out of 5):

Education

Policies

* Allow parents, teachers and voluntary groups to set up independent "free" schools.

* Give state schools funding to take rival exams to A-levels and GCSEs.

* Launch consultation on "pupil premium" – giving schools extra cash for taking in disadvantaged children.

Will they work?

There is no doubt that the reforms could be very radical in their impact, particularly if the majority of schools opted out of council control and decided to become academies, running their own affairs.

However, so far the take-up has been disappointing, with only 153 out of a potential 26,000 schools making applications. Few are expected to get the go-ahead from the start of the new school year. This is in spite of the Education Secretary, Michael Gove, telling MPs that 1,100 had applied. Similarly, it is early days for the Swedish-style "free" schools programme.

On the examinations front, though, there is more positive news for the Government with the number of state schools applying to take up the International GCSE exceeding the number of applications from private schools for the first time last month.

In addition, 60 state schools have also applied for training in how to deliver the exam in September.

The move towards the introduction of the "pupil premium" – one of the key pledges in the Liberal Democrats' election manifesto – could mark a step change in education policy, giving schools a financial incentive to tackle underperformance among the disadvantaged.

Just how radical it turns out to be will depend on the size of the premium, though, and we will not know that until after the comprehensive spending review is completed.

Richard Garner, Education Editor

Radical rating:

Defence

Policies

* Nuclear deterrent will stay.

* Number of senior officers likely to be cut across services.

* Defence procurement system to be reformed.

* Concentrating UK forces in Afghanistan in central Helmand, handing over bases such as Sangin to the US.

Will they work?

The room for manoeuvre of whichever government is in power is limited with the war in Afghanistan swallowing up a vast amount of resources while long-term policy will be decided by the Strategic Defence and Security Review.

Liam Fox has rejected merging any of the three services but has said that the ranks of the top brass will be thinned out. This, however, will only make up a small portion of the required savings and all three services face painful cuts.

The Defence Secretary has been pressing for the Treasury to underwrite the billions of pounds needed to replace Trident, but the Chancellor is adamant that it must come out of the defence budget.

In foreign affairs, the approach has been unexpectedly robust. The most strident statements have come from David Cameron, but unlike foreign secretaries under Tony Blair, William Hague is believed to have played a full part in formulating the policies. The most controversial statement from the Prime Minister has been about Pakistan's export of terrorism. Mr Cameron also described Gaza as a prison camp and rejected American demands, including an inquiry into BP's alleged role in the release of the Lockerbie bomber.

Kim Sengupta, Defence Correspondent

Radical rating:

The economy

Policies

* Delivered toughest Budget since Second world war; 600,000 public sector jobs to go; VAT to 20 per cent

* £6.2bn slashed from public spending immediately

* Abolition of FSA

* New Office for Budget Responsibility

Will they work?

If the Government delivers its plans then it will go down as the most radical since the Second World War – the corollary of taming the biggest Budget deficit ever seen in peace time.

The Government may indeed have saved the nation from a Greek-style sovereign debt crisis, soaring interest rates and new bank failures. While many argue the chances of that were much exaggerated, few would query the vast damage that a second financial crisis, albeit unlikely, would have inflicted.

The obvious cost now is the confidence you can almost hear being sucked out of the economy. A "double dip" recession, and a longer term stagnation are growing in likelihood. That means little growth in living standards and more unemployment.

The institutional changes at the Bank, the Financial Services Authority and the Office for Budget Responsibility are both less revolutionary than when Labour gave the Bank power to set rates in 1997, and far less significant than the challenge of avoiding a slump. The OBR will find its feet after a botched start and the Bank will probably do a better job than the FSA.

Sean O'Grady, Economics Editor

Radical rating:

Environment & climate

Policies

* Abolish 36 of the 91 environmental quangos, including the Sustainable Development Commission.

* Draft new energy Bill to put in place a massive programme to insulate millions of homes.

* Push for higher EU carbon reduction targets.

Will they work?

Taking the axe to long-established and respected green bodies (the Royal Commission on Environmental Pollution dates back to 1970 and the Sustainable Development Commission was the Government's official green adviser) has been the clearest sign yet of the radical intentions of the Coalition – and its cost-cutting side as represented by the Conservative Environment Secretary, Caroline Spelman.

Although this was supposed to be the greenest government ever, it is becoming clear that, at least with the natural environment and the countryside, this Government's involvement is going to be cut right back, to such an extent that we may see the privatisation of nature reserves.

With climate change on the other hand, the intensely activist policy pursued by the two Miliband brothers – who were successively in charge of it, David and then Ed – is being continued with flourish by the Liberal Democrat Climate Secretary, Chris Huhne. In so far as the direction of policy has already been established, his record can hardly be called radical, but it is certainly radical compared with many other countries, and there have been a stream of climate-related initiatives coming out of the Department of Energy and Climate Change over the 100 days, from the speeding up of the rollout of "smart" electricity meters to allowing councils to sell green electricity to the national grid.

Michael McCarthy, Environment Editor

Radical rating:

Justice & immigration

Policies

* Abolition of the national identity card scheme.

* Cut police overtime, abolish targets and create elected police commissioners.

* Reduce the number of prisoners serving short sentences.

* Scrap Asbos.

* Cap immigration numbers.

Will they work?

The Coalition has shown no fear in tackling some of the more awkward questions in the law and order debate.

Most notable headway has been achieved where Conservatives and Liberal Democrats agree on the abolition of Labour policies which they opposed in opposition, sometimes for different reasons. The scrapping of the ID card scheme and the Asbo are good examples.

Where there is no agreement between the two governing parties, reform has ground to a halt. This is particularly so with immigration policy, which amounts to no more than a modest cap on non-EU economic migrants.

Perhaps the most radical approach has been led by Ken Clarke, the Justice Secretary, who has committed the new Government to reversing the rise in the prison population, angering some Tory backbenchers and at least one former Tory home secretary. But this revision of all things Labour is not without its controversies. Proposals to end the trials of the "go orders" scheme to protect women from domestic violence by banning abusers from the home have been condemned. And plans to close Labour's ContactPoint database of 11 million children, demonstrates a worrying willingness to throw the baby out with the bathwater.

Robert Verkaik, Law Editor

Radical rating:

Electoral reform

Policies

* Referendum on switching to the Alternative Vote for electing MPs to be held on 5 May.

* Number of MPs to be cut from 650 to 600 and size of constituencies equalised.

* Proposals for wholly or mainly elected House of Lords to be produced by December.

Will they work?

Nick Clegg was guilty of hyperbole when he promised the biggest shake-up of democracy since the Great Reform Act of1832. But, if fulfilled, the Coalition's programme of constitutional reform would still leave a lasting mark on British politics.

Mr Clegg, who has taken personal charge of the reform plans, faces two serious obstacles to his ambition to scrap first-past-the-post elections for Westminster.

First he has to get the referendum Bill through Parliament – and then win a referendum campaign that will pitch Liberal Democrats against the vast majority of their Tory partners.

Many in his party also complain that the proposed Alternative Vote system falls far short of fully fledged proportional representation. Indeed Mr Clegg once denounced AV as a "miserable little compromise".

Were he to lose the referendum – a strong possibility, judging by recent polls – he would have to point to Lords reform as evidence of his radical credentials.

It would be no mean achievement: Labour has been promising to sweep away the hereditary principle in the upper chamber for a century.

Procedural changes to Commons business are not glamorous, but should make Parliament more responsive to events and give more power to backbench MPs.

Nigel Morris, Deputy Political Editor

Radical rating:

Work & pensions

Policies

* Bring 51 jobless benefits into a single credit.

* Default retirement age of 65 to be scrapped by October 2011.

* Housing, disability and incapacity benefits to be cut.

* Credit reference agencies to pursue benefit fraudsters.

Will they work?

New governments often talk big about overhauling the welfare state – and end up acting small.

Caution is not an option for the Coalition Government, given its overwhelming need to slash state spending.

Iain Duncan Smith, the Work and Pensions Secretary, has so far demonstrated the necessary reforming zeal to get the job done. But a streamlined benefits system, with built-in incentives for the jobless to take work, could cost £3bn to set up.

George Osborne, the Chancellor, is baulking at that expense and demanding extra savings in the welfare budget to compensate.

Smoke signals from Whitehall suggest that a provisional deal has been reached.

Whatever the detail, millions of benefit claimants are going to feel the financial pain. Cuts to housing and disability have already been announced by Mr Osborne as he trimmed welfare spending by £11bn in the Budget. He has also made clear that he has incapacity benefit in his sights.

Moves to raise the state retirement age were already set in train by Labour, but the Coalition Government seems determined to implement the increase more quickly.

Nigel Morris

Radical rating: