George Osborne defies right-wing Tory calls for more welfare cuts

CHANCELLOR George Osborne this morning ruled out both tax increases and more cuts in welfare and warned the Cabinet awkward squad of ministers that they will have to accept deeper cuts in defence and security.

Osborne in effect aligned himself with David Cameron and Nick Clegg, the Lib Dem leader, behind the coalition. He set himself against the right-wing group of ministers including Defence Secretary Philip Hammond, Environment Secretary Owen Paterson and Welfare Secretary Iain Duncan Smith, who have been growing bolder in openly challenging Cameron and Osborne's authority in recent weeks about gay marriage, immigration and an in-out EU referendum.

Osborne, appearing on Radio 4's Today programme, also took a sideswipe at bumptious Observer commentator Andrew Rawnsley for saying in his column on Sunday that Communities Secretary Eric Pickles was holding out for more money when he had in fact already settled along with six other Whitehall departments, including Justice under Chris Grayling, who - with Home Secretary Theresa May - was trying to raid the NHS budget to protect his own.

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Osborne has already ruled out cutting 'ring-fenced' budgets – for overseas aid, the NHS and pensions. Today he ruled out the easy option of increasing taxes instead of imposing cuts in spending, saying: "I am in effect ruling it [tax increases] out."

More significantly, he also ruled out more cuts in welfare in 2015 – the year under review. Osborne said: "We have already made substantial cuts in welfare, not just for the current welfare budget but the future welfare budget for 2015.

"I have already announced, a couple of months ago, big savings to the welfare budget including holding down increases in welfare payments to below the rates of inflation... My main assumption in this spending review is that this money is coming out of Whitehall departments... We have to make sure that Whitehall is not let off the hook."

By saying that, he was rejecting the deal offered by IDS in an interview in the Daily Telegraph this morning to avoid cuts in defence and security by cutting deeper into his own welfare budget to the tune of £3 billion – a policy he knows would be blocked by Clegg and the Lib Dem half of the coalition.

As the Daily Telegraph deputy editor Ben Brogan tweeted: "By ruling out more welfare cuts, is Osborne aligning against National Union of Ministers, esp Hammond."

IDS was throwing down the gauntlet to the Chancellor, saying he could reduce the welfare budget by cutting housing benefit for under-25s – a policy backed by Cameron last year – to avoid cuts in defence. He even revealed he had spoken to Philip Hammond about the idea.

Osborne picked up the gauntlet and slapped IDS's face with it – but he now risks a showdown with the right wing of the Tory party. They support the aims of the ministers digging in their heels against more cuts in defence and the intelligence services, especially after the Woolwich killing. They are now openly saying that they do not believe this is the way to run a Tory government.

When he gets back from chillaxing in Ibiza, the Prime Minister could have a full-blown Tory revolt on his hands to deal with.