The welfare state is unaffordable, George Osborne will tell MPs this week, and permanent cuts will be required to make the public finances “sustainable”.

The Chancellor will use his Autumn Statement on Thursday to set out more details of a new cap on welfare spending after the next general election.

It is an attempt to put permanent limits on around £100 billion a year of spending on items such as Housing Benefit and some unemployment payments.

Mr Osborne yesterday hinted that, even after the current austerity programme, more fundamental changes will be needed to give Britain an “affordable state”.

The Chancellor will also use his set-piece economic statement to Parliament on Thursday to update MPs on the state of the public finances.

The economy is recovering and currently growing more quickly than any other developed economy. That will allow Mr Osborne to borrow up to £20 billion less this year than he had expected and some economists have suggested that borrowing over the next five years could be up to £70 billion lower than expected.

The modest improvement in public finances has raised hopes that Mr Osborne will be able to offer tax cuts and higher spending.

But he will tell MPs that he will still borrow around £100 billion this year and that his goal of eliminating the deficit is still several years away.

Treasury plans show austerity will have to continue until at least 2018. “People know the job is not done. There are going to have to be more difficult decisions. I’m going to have to take more difficult decisions this week because ultimately you can’t will your country’s public finances to be in better shape,” the Chancellor told the BBC.

Welfare payments account for around £120 billion of the £720 billion the Government spends each year. Mr Osborne suggested that even after the current round of cuts is complete, more fundamental change will be required.

“The cost of welfare is one of the things that makes the public finances unsustainable,” he said, adding: “We need an affordable state.”

The Chancellor earlier this year sketched out plans for a permanent cap on welfare spending from 2015. Under the plan, an annual ceiling for welfare would be set every four years. Ministers spending more than the limit would have to explain the overshoot to Parliament.

Whitehall sources said the Autumn Statement would include more details, setting out how the limit would be set.

The cap is expected to cover welfare payments that do not fluctuate in line with the economy, meaning that most unemployment benefits are excluded. But most housing benefit – which currently costs more than £20 billion a year – will be included.

Treasury sources said no new welfare cuts are likely before the general election in 2015.

The Liberal Democrats have said they will not allow the Coalition to cut welfare further during this Parliament, meaning more reductions would only come in if the Conservatives win the next election.

The cost of welfare is one of the things that makes the public finances unsustainable.

Woking tax credits haha Sorry people of Woking but you must suffer for the common good...

they’ve got more chance of passing a camel through the eye of a needle than getting a state pension. .

My kids are my pension and the same applies for everyone else unless they win the lottery basically and even then, they'll have to put it into land.

all those landlords relying on tenants who claim housing benefit will be sweating now.

humanspirit wrote:
Given most houses on zoopla etc say 'NO DSS!' 'NO PETS' 'NO CHILDREN' etc I'm surprised they give a shit about renting houses at all, maybe they just like seeing pictures of them on the net? :p

Seriously...take a look at how many adverts actually say no dss. Its around 80-90% by my reckoning.

humanspirit wrote:
Given most houses on zoopla etc say 'NO DSS!' 'NO PETS' 'NO CHILDREN' etc I'm surprised they give a shit about renting houses at all, maybe they just like seeing pictures of them on the net? :p

The politicians fraudulent expense claims are un-fucking-affordable. But even after it supposedly came under the spotlight a while back, they're still royally taking the piss, at the same time as they're turning people out in the street.