Treasury committee grills chancellor about how he will fill hole in budget caused by ditching reduction in disability payments

George Osborne was repeatedly challenged by a former Labour frontbencher at a select committee on Thursday as he refused to say whether he would make new cuts to benefits to balance the books.

Rachel Reeves, the former work and pensions secretary, asked Osborne whether he would be forced to reduce the benefits bill further to meet his “welfare cap”, which current forecasts show him busting by £20bn over the course of this parliament.

The chancellor was appearing before the Treasury select committee to defend last week’s budget, in which proposed cuts to disability benefits had to be “kicked into the long grass” following a backbench revolt and the resignation of the work and pensions secretary, Iain Duncan Smith.

Osborne repeatedly used the formula that he had “no plans” for more cuts when questioned by Reeves, and echoed the promise of new work and pensions secretary Stephen Crabb, that: “We’re not going to replace the £1bn more we’re going to be spending on disability benefits with some other cuts to welfare.”

The Labour MP replied: “With the greatest respect chancellor, that’s not the question I’m asking you,” in one of a series of testy exchanges. “It’s the answer I’m giving you,” replied the chancellor.

Osborne added: “I think people know what we set out to achieve; it is in our election manifesto, and this budget delivers our manifesto.”

Asked whether the welfare cap was still government policy, he said “Controlling welfare spending is necessary for the economy.”

The chancellor’s rough ride came as new polling showed that his popularity with the public has slumped in the wake of the budget. A survey carried out by Ipsos Mori for the Evening Standard found that 60% of people are dissatisfied with Osborne, including one third of Conservative supporters, up from 46% in the month before the Budget.

Duncan Smith used his explosive resignation letter of last Friday to argue that the budget was “unfair”, and blame the Treasury for forcing him to make cuts. But Osborne hit back yesterday, saying: “The proposals on personal independence payments advanced by the DWP were the response to a review that they had carried out.”

The chancellor refused to say whether Duncan Smith had questioned the plans during earlier discussions, but said “in the end, you reach a collective decision”. He added that there was “alway likely to be a difficult relationship” between the chancellor and the minister in the biggest-spending department.

The interpretation of Osborne’s own tax and spending rules also featured as Andrew Tyrie, the committee’s Conservative chairman, urged him to “spare the government a great deal of political grief” in future by taking a longer-term approach.

The chancellor defended his decision to announce new spending cuts in the budget, including £3.5bn from Whitehall departments, to ensure the rule to deliver a surplus on budgets by 2020 could still be met despite deteriorating economic forecasts.

“I think it is best to get ahead of the curve,” he said. “I thought it was sensible to act on that now, albeit with decisions that take effect several years down the track.”



But Tyrie warned him that adjusting his spending plans twice a year – at autumn statements and budgets – in response to changes in economic forecasts, had created unnecessary instability.

He urged Osborne to reflect on the way the rules were assessed, which at present force him to pencil in spending cuts or tax rises in several years’ time, to show that he can deliver a surplus on the public finances. “It’s not as if this is something that can’t be changed,” Tyrie said.

However, Osborne insisted aiming to put the public finances back in the black was the right approach. “When are you going to run a surplus in this country, if after seven or eight years of economic growth you are not running a surplus?” He also rejected the argument of Labour MP Wes Streeting that the target is only met because of “accounting wheezes and window dressing”.

Both the Office for Budget Responsibility and the Institute for Fiscal Studies thinktank have suggested the chancellor has shuffled spending cuts and tax revenues between one year and another in order to balance the books.