Osborne warns of summer assault on welfare bill

Chancellor George Osborne has warned of a fresh assault on welfare payouts over the summer as the Government looks for savings to reduce Britain's massive state deficit.

Mr Osborne said there would be a "trade-off" which could see savings in the multi-billion pound benefit bill used to cushion the impact of cuts of as much as 25 per cent in budgets for public services like the police, defence and schools.

He named Housing Benefit and Employment and Support Allowance - which replaced Incapacity Benefit for people with long-term health problems - as areas where the axe may be wielded.

Mr Osborne stressed that any reforms would protect the disabled and those in "genuine need", but would aim to encourage those who are able to work to get off benefits and into employment.

Some 2.6 million people claim ESA or Incapacity Benefit at a cost of around £12.5 billion annually while Housing Benefit pays out about £21 billion a year. These figures make the benefits bigger drains on taxpayers' money than many Whitehall spending departments, pointed out Mr Osborne.

Ministers have been told to look for ways of reducing the welfare bill over the summer, in time for details to be unveiled in the Spending Review on October 20.