Osborne looks for £10bn of welfare savings..

George Osborne is eyeing £10bn of savings from the welfare budget according to this morning’s papers. The Times (£) reports that the Chancellor will look to save £2.3bn from a temporary freeze in working-age benefit levels as part of a “kite-flying” exercise which will act as a prologue to a proposed Welfare Bill in 2014. 

Unsurprisingly, Mr Osborne gets support from Danny Finkelstein:

“Once we stop, once we return to a policy of borrow and spend, how will we ever summon the will to stop again? The ability to assemble a coalition (small ‘c’) ready to accept public spending restraint is something that has eluded every other Western government except ours.”

Although there is speculation that the move might lead to a rift in the coalition, notably in our report, it seems significant that the Sun reports that the Lib Dem leadership will back the proposed freeze.

Privately Mr Clegg is clear that substantial additional cuts to the welfare budget will be necessary to balance the books. But in exchange he wants some form of wealth tax to even out the impact. He believes it is socially and electorally unacceptable to take money away from the poorest without demanding a contribution from the very wealthiest (method TBC). Mr Osborne may find this the biggest obstacle to securing the savings he needs.

The duration of the freeze is also unknown at this point, with theIndependent suggesting that it may last two years. Longer term, there could also be significant savings from linking to welfare payment rises with pay levels, according to a Resolution Foundation report cited in the FT(£). With pay likely to lag inflation over the coming years, this would be welcome news for many. As our leader puts it: “welfare claimants need to tighten their belts, too.”

IDS NOTES SCOTTISH WELFARE DEPENDENCY

This morning sees the Joint Ministerial Conference between the Prime Minister and the heads of the devolved assemblies convene in London. 

What was already likely to be a strained atmosphere has probably not been helped by a leak of Iain Duncan-Smith’s speech this afternoon. IDS is expected to weigh into the Scottish independence debate, arguing that Scotland would not be able to afford its welfare bill as an independent state.  As the Guardian reports, IDS will say:

"Due to the reliance on the old heavy industries in many parts of the country, it makes perfect sense that we need to spend more money per head of population on welfare support in Scotland. I have no problem with that.

"If the unthinkable were to happen, a Scottish government would face a very stark choice of raising taxes or cutting services. This is not scaremongering, it's reality."

That should help create a nice, collegiate atmosphere at Number 10 later today. 

HUGHES: LIB DEMS JUDGED ON THE ECONOMY

Speaking before the Lib Dem party conference, Simon Hughes is quoted in the Independent stressing the importance of the economy to his party’s chances at the next election:

"At the next election we will be judged by whether, relative to the rest of the Western developed world, we have steered our way through these difficult waters."

The responsible tone chimes with the coolness under pressure which I detect in the party leadership. As I write in my Telegraph column today, Mr Clegg is an example to his coalition partners:

“His overarching theme, though, should serve as yet more useful advice for the Tory leader. It is that in difficult times, there is no alternative to the hard course the Coalition has agreed. What the voters demand instead is that very statesmanship that can explain, intelligently and soberly, the sacrifices that are needed, and why they will extend beyond this Parliament and the lifetime of this Coalition. His example of resolve under fire is one Mr Cameron could usefully follow.”

MILLER: CONSERVATIVES JUDGED ON GAY MARRIAGE

And just as the coalition was being patched up with some conciliatory words, Maria Miller has popped up in the Independent and pushed one of the most divisive issues in the Tory party back to the fore. Ms Miller wrote:

“My view is simple; marriage is hugely important. It makes us stronger. Vital family ties will be forged when two people choose to commit.

“The state should not stop two people undertaking civil marriage unless there are good reasons, and I believe being gay is not one of them.”

A number of her colleagues believe that to be a very good reason, but Ms Miller’s appointment and statement of intent suggest that, at the top of the party, the issue is closed.

AFGHAN EMBARRASSMENT FOR HAMMOND

Philip Hammond endured a torrid day at the dispatch box yesterday attempting to defend the decision to reduce the contact between coalition forces and Afghan troops. As the Times (£) reports, Mr Hammond was only made aware of the decision, taken by US generals over the weekend, on Monday after he had already appeared in the Commons. 

The appearance led to terrible headlines for the Defence Secretary. “Afghan exist in chaos as Hammond stumbles,” in the Times and “Hammond scrambles to clarify UK’s role after Afghan change,” in theGuardian are representative. 

Britain’s timetable for withdrawal was also shrouded in mystery last night. Although the Times report says that the majority of Britain’s 9,500 strong contingent in Afghanistan will return before the 2014 deadline, the consensus appears to be that they will not have wrested control from the Taliban by this time.

In the Mail, Quentin Letts is scathing about the decision to bar Mr Flynn from the Commons debate on Afghanistan when he called Mr Hammond a liar. He contrasts his passion with that found on the Government benches:

“It takes raw belief to get banned from the Commons...if only the Right could do it more often! 

BRITAIN ISOLATED IN EUROPE SHOCK

The Guardian leads on the news that five of the six largest EU countries (Britain being the odd man out, unusually) have decided to push for more extensive centralisation of foreign policy and defence powers. 

The demands, by a voting bloc which could override the British veto,  have the potential to spark another unholy row over Europe between the coalition partners on the back-benches. It’s a debate which would be unwelcome for Dave, but it’s one which is looking increasingly unavoidable.

SWAP SHOP:  IHT FOR MANSION TAX?

The Lib Dems are to discuss a proposal to exempt homes from inheritance tax in exchange for mansion tax payments under a new plan, we report.

It’s an interesting move, but again it is also one which could prove uncomfortable for the Conservatives. They were responsible for dragging IHT into the public spotlight before the 2010 election with a promise of a £1m threshold. As it stands, the threshold is still only £325,000 per married person, meaning a £650,000 ceiling.

NO RIGHT TURN FOR CLARKE

Kenneth Clarke insists that the Ministry of Justice will not get tougher with criminals  despite the appointment of Chris Grayling to his old job in the recent reshuffle. The move, seen as heralding a more hardline policy approach was dismissed by Mr Clarke, we report. He also had some interesting thoughts on coalition harmony and the economy:

“George wants me in to keep an eye on Vince, and Vince wants me in to keep an eye on George.

“We’ve got a deficit the size of Greece, we’ve got a real job on our hands. I don’t want to bring too much gloom, but it will be a long haul.”

SAUDIS RIDE TO THE TREASURY’S RESCUE

There will be relief at the Treasury this morning given that the FT (£) splashes on Saudi Arabia’s plan to boost oil production. The price of Brent crude has risen to $120 per barrel in recent months, which the Treasury view as unsustainable. The Saudis apparently have a $100 a barrel price target in mind. 

Falling crude prices would also make it easier for the Treasury to put its foot back on the fuel duty escalator, however, so don’t expect pump prices to stay low for long.

PANTS TO DAVE

And finally...Boris supporters, already bolstered by last week’s strong poll showing in a Bo-Jo v Ed M electoral contest, have another reason to cheer. According to the Sun, the Mayor of London has overhauled the Prime Minister in the all important pants index. The paper reports:

“Bo-Jo has embarrassed bitter rival David Cameron yet again by shifting more pairs [of pants] with his mugshot on than the PM. A website selling the white Y-fronts with politicians faces on the rear has crashed 14 times in the last few weeks due to demand for Bo-Jo ones.”

TWEETS AND TWITS

Kerry McCarthy is quick to quell the notion that the fifteen days between the House of Commons returning from summer holiday and rising for the conference season were not enough:

@KerryMP: “Parliament now in recess till October 15th for party conferences so on my way back to Bristol #recessnotholiday” 

TOP COMMENT

In The Telegraph

Benedict Brogan - What the Prime Minister could learn from Nick Clegg’s coolness under pressure

Alastair Campbell - The Thick of Mitt 

Lt Col Charlie Maconochie - 'Green on Blue' attacks must not deter us

Rowan Pelling - Good riddance to GCSEs – we parents hated doing them 

Best of the rest

Daniel Finkelstein in The Times (£) - If we don't cut the deficit now, when will we?

Matthew Norman in The Independent - Unambitious? Are you taking the Michael? 

Philip Clarke in The FT (£) - Lessons from the supermarket for austerity Britain

Ann Widdecombe in the Daily Express - Tory talk of ditching Cameron is just daft

THE AGENDA

Today: Opening of the 67th session of the UN General Assembly in New York.

9:00 am: Prime Minister hosting meeting of Joint Ministerial Council, with leaders of devolved executives. 10 Downing Street.

9:30 am Bank of England publishes minutes of September meeting of monetary policy committee. 

9:30 am: Good Food March by demonstrators from across Europe demanding the reform of the Common Agricultural Policy (CAP).  Brussels.

11:00 am: Brian May launches Team Badger initiative against the Government's imminent cull of badgers in England, which it is undertaking in an attempt to address Bovine TB in cattle. Ad site 5, West Cromwell Road.

1:00 pm: Women protest outside Downing Street. The protesters against "how the police and courts deny rape victims justice" will be in underwear with slogans on their bodies. 

2:40 pm: Work and Pensions Secretary Iain Duncan Smith speech on welfare reform to Welfare to Work Scotland conference. Crown Plaza Hotel, Congress Road, Glasgow.

6:45 pm: National Association of Head Teachers (NAHT) press conference on its agenda for the 2012/13 academic year. Hilton, 92 Southampton Row.