Iain Duncan Smith has resigned as work and pensions secretary in the row over cuts to disability benefits.
The cabinet minister, who has been in post since 2010, said he disagreed with the cuts to personal independence payments as a “compromise too far” and had too often felt pressured to make huge welfare savings before a budget or autumn statement.
In an attack on George Osborne in what was the biggest resignation since David Cameron became prime minister, Duncan Smith said the disability cuts were defensible in narrow terms of deficit reduction but not “in the way they were placed in a budget that benefits higher earning taxpayers”.
He said he was stepping down because Osborne’s cuts were for self-imposed political reasons rather than in the national economic interest.
The work and pensions secretary, who is campaigning to leave the EU on the opposite side to Cameron, said he was resigning with enormous regret.
Just hours earlier, government sources had signalled they were prepared to back down on the disability benefit cuts, which were facing a massive Tory rebellion, kicking them into the long grass.
“I am unable to watch passively whilst certain policies are enacted in order to meet the fiscal self imposed restraints that I believe are more and more perceived as distinctly political rather than in the national economic interest,” Duncan Smith wrote in a resignation letter to Cameron that was released to the media.
“Too often my team am I will have been pressured in the immediate runup to a budget or fiscal event to deliver yet more reductions to the working age benefit bill. There has been too much emphasis on money saving exercises and not enough awareness from the Treasury, in particular, that the government’s vision of a new welfare-to-work system could not repeatedly be salami-sliced.”
Duncan Smith’s resignation comes in the context of his Euroscepticism in opposition to Downing Street, but also longstanding bad political blood with Osborne himself.
The stinging critique of the Treasury’s zeal for welfare cuts in order to save money delivers a blow to Osborne’s arguments that they are necessary to bring down Britain’s national debt.
Duncan Smith’s resignation comes after a growing number of Tories signalled their alarm over reductions in personal independence payment (PIP), which the chancellor said would save £4.4bn over the course of this parliament.
It was announced by the Department of Work and Pensions (DWP) a week ago but confirmed in Osborne’s budget and defended by Downing Street until Friday.
After Cameron said the reforms would need time to make sure they were right, a Treasury source said: “This is going to be kicked into the long grass. We need to take time and get reforms right, and that will mean looking again at these proposals.
“We are not wedded to specific sums … it’s not an integral part of the budget.”
The pause in the plans is a humiliating blow for the chancellor, who had hoped to use his eighth budget on Wednesday to burnish his credentials for the Conservative leadership.
The Treasury stressed that the figures included in the budget were the DWP’s work; but department insiders had complained that they were bounced into publishing the proposals without the time to build support.
Speaking in Brussels on Friday evening, Cameron suggested he might be prepared to soften the controversial cuts, promising to consult with disability groups and “make sure we get this right”.
Asked by the Guardian about concerns among his MPs and disability charities, the prime minister had said: “A number of reviews have been done, a lot of work has been done and that is why these proposals have been put forward. As the chancellor said, but I will repeat, we will be discussing this with disability charities and others and make sure we get this right.”
The comments appeared to back up remarks made by Nicky Morgan, the education secretary, on Thursday that the proposals were only a “suggestion”.
The apparent climbdown came as Conservative rebels turned their fire on Osborne over what they see as the toxic politics of the budget, which juxtaposed the PIP cuts with tax giveaways for businesses and higher earners.
Conservative backbenchers voiced their concerns, including the former GP Sarah Wollaston, who tweeted that the government would, “never meet approval for change that would reduce entitlement to PIP at the same time as raising the higher rate tax threshold”.
Labour leader Jeremy Corbyn said: “The resignation of Iain Duncan Smith reveals a government in disarray and a chancellor who has lost the credibility to manage the economy in the interests of the majority of our people.
“The budget has exposed George Osborne’s record of profound unfairness and economic failure. Not only must the cuts to support for disabled people be abandoned, but the government must change economic course.
“The chancellor has failed the British people. He should follow the honourable course taken by Iain Duncan Smith and resign.”
Some of Osborne’s Eurosceptic colleagues argue that he has been so focused on managing what they deride as Project Fear – the campaign to keep Britain in the EU – that he failed to devote enough attention to laying the political groundwork for his budget.
DWP sources suggested the timing of last Friday’s announcement on the cuts was driven by the Treasury. Even though they were expected to save more than £4bn, ministers have stressed that the total cost of disabled support will increase in cash terms.
Osborne has been called to appear before the cross-party Treasury select committee on Thursday to give evidence about the economic costs and benefits of EU membership. It will be a day after they have heard from Boris Johnson, the Eurosceptic mayor of London widely seen as a rival for the Tory crown.
Osborne has already faced scepticism from the Institute for Fiscal Studies, which said he had a “50-50 chance” of meeting his self-imposed target of achieving a surplus on the public finances by the end of the parliament, even allowing for a series of accounting tricks to “shuffle” revenue from one year to another.
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