Welfare saved from spending cuts

Welfare and pensions are not expected to take any of the brunt of the £11.5 billion savings that Chancellor George Osborne is demanding from Whitehall departments in 2015/16.

Cabinet ministers including Defence Secretary Philip Hammond have been lobbying for benefits to take a sizeable portion of the pain when the Chancellor announces his spending review for 2015/16 on June 26, to avoid further cuts to areas such as the military, law and order, and local government.

But a senior Treasury official told reporters that, after negotiations between the Tory and Liberal Democrat sides of the coalition, there was an "assumption" that welfare will be spared further reductions.

And he said the Government's continuing commitment to its "triple lock" on pensions meant that any reductions in the basic state pension can also be ruled out.

"The assumption is that there won't be further specific welfare savings in the spending review," said the official. "It is no secret that the Conservative side of the coalition would like to make further savings on welfare, but that is the assumption."

Total managed Government expenditure for 2015/16 will be £745 billion.

To achieve that figure while increasing spending on capital projects by £3 billion, Mr Osborne announced today that he will be looking to Whitehall departments to find £11.5 billion in savings from their day-to-day spending - up from the £10 billion he predicted in his autumn statement in December.

Health, schools and international aid will be protected from cuts, while defence equipment budgets are to be allowed to rise by 1% annually in real terms from 2015.

The protection of welfare and pensions means that an even larger axe is now hanging over the heads of Whitehall spending departments such as defence, transport and the Home Office.

Mr Osborne also revealed that he plans to use the review to tighten the Treasury's control over departmental spending as part of a drive to stop welfare programmes inexorably swallowing up more cash.