Benefit payments to families living outside Greater London are to be capped at £20,000 a year.
In the first Conservative budget for 19 years, George Osborne will say that the previously announced figure of £23,000 will only apply to families living in the capital in a further cut to the welfare budget.
Disclosure of the additional cut came during the chancellor’s appearance on the BBC’s Andrew Marr Show, in which he claimed to have found the £12bn of welfare savings promised by the Conservatives as part of their plan to eliminate the deficit in the public finances.
Other savings to be announced in Wednesday’s budget will include a £650m raid on the BBC’s licence fee, Osborne confirmed, before launching an attack on the broadcaster’s “imperial” ambitions.
He has resisted demands from the Conservative right for a reduction in the 45p top rate of income tax as he made clear that his priority was to reduce taxes for middle and low-income earners.
Ministers will go further in capping welfare payments than the proposed household limit set out in the party’s election manifesto, at the same as time curbing the cost of tax credits.
The plan will prompt claims that lowering the cap for the rest of the country will be unfair on many claimants who live just outside Greater London but whose cost of living is still high.
Osborne said during his interview with Marr that he would be going further than previously planned in cutting the benefits cap currently set at £26,000 a year in order to ensure the system was fair to working people.
“It is not fair that people out of work can earn more than people in work, so we are going to cut the benefit cap, as we said in our manifesto, to £23,000 in London … it will be lower in the rest of the country,” he said.
It is understood that he will announce the cap outside London at around £20,000. Across the country as a whole, the government believes tthe move will affect 90,000 households. It will exempt those on disability benefits such as disability living allowance, personal independence payment and employment and support allowance.
Osborne made clear that he would also be looking to make significant savings to the system of tax credits brought in under the previous Labour government to top up the incomes of low-paid working families.
“It has become a very, very expensive system. When it was introduced, we were told by Gordon Brown it was going to cost a couple of billion pounds,” he said.
“It now costs £30bn. That is a huge sum of money. That’s three times the Home Office budget, so we have to make savings.”
Osborne confirmed reports that he wishes to transfer the annual £650m cost of providing free television licences for the over-75s from the Treasury to the BBC.
“The BBC is also a publicly funded institution, and so it does need to make savings and contribute to what we need to do as a country to get our house in order. So we are in discussion with the BBC,” he said.
He reserved his most outspoken criticism of the BBC for its website, and claimed that it had effectively become “the national newspaper as well as the national broadcaster”.
“You wouldn’t want the BBC to completely crowd out national newspapers. If you look at the BBC website it is a good product but it is becoming a bit more imperial in its ambitions,” he said.
The planned cuts and his harsh language have confirmed suspicions among some BBC executives that the Tories wish to move against the corporation. The former BBC chairman Sir Christopher Bland accused Osborne of “shoddy” accounting practices.
“It is the worst form of dodgy Whitehall accounting. It is transferring social policy on to the licence fee,” he told BBC Radio 4’s The World this Weekend.
Labour indicated that it might support the plan. The shadow chancellor, Chris Leslie, told Sky News’s Murnaghan programme: “We have always said sensible savings at this time are really important and I don’t think the BBC can be excluded from that.”
Osborne said that further savings of £250m would be achieved by ending “taxpayer-funded subsidies” for 340,000 higher earners living in social housing.
Local authority and housing association tenants on incomes of £40,000 or more in London and £30,000 in the rest of England will be told that from 2017/18 they will have to pay a market or near-market rent.
Osborne is yet to confirm whether he is still considering a plan, leaked to the BBC, to make cuts to some disability benefits. The document, written before the election, suggests some claimants of sickness benefit could be instead shifted to jobseekers’ allowance – a cut of £30 a week.
In March, the supreme court found that the government’s current benefit cap had left claimants at risk of being unable to house, feed or clothe their families, putting it in breach of the UK’s obligations under the UN convention on the rights of the child.
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