Osborne axes child benefit and confirms welfare cap

Families on welfare benefits will have their payments capped at about £500 a week from 2013 while child benefit will be withdrawn from higher-income families, chancellor George Osborne announced today.

In his keynote speech to the Conservative Party conference, Osborne confirmed that the benefits cap would be put in place to ensure that no family on benefits would earn more than those in work. The plan is part of welfare secretary Iain Duncan Smith’s plan to overhaul the benefits system.

Disability living allowance claimants, war widows and working families claiming the working tax credit will be exempt from the cap, which will apply to the combined income from the following individual benefits:

• jobseeker’s allowance
• income support
• employment support allowance
• housing benefit
• council tax benefit
• child benefit
• child tax credit
• other benefits, such as carer’s allowance and industrial injuries disablement benefit.

Local authorities will deliver the cap after assessing all new and existing housing benefit claimants. The value of the cap is based on the Family Resources Survey, which estimates that the median income earnings after tax for working households is £479 a week, rising to £506 a week by 2013.

The chancellor also confirmed the withdrawal of child benefits for households that contain at least one higher rate taxpayer, currently those who earn at least £43,875 a year. The Treasury estimates this will save about £1bn a year from the welfare bill and will cost families £20.30 a week for the eldest child and £13.40 a week for each other child.

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