David Cameron slaps down Iain Duncan Smith on child benefit limits

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Downing Street insists child benefit will not be cut for the next five years
Comes after Iain Duncan Smith 'modelled' plans to reduce the benefit
Options included limiting to two children and cutting amount for first child

By Jason Groves Deputy Political Editor For The Daily Mail

Published: 12:02 EST, 1 June 2015 | Updated: 03:03 EST, 2 June 2015

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Downing Street yesterday overruled Iain Duncan Smith over suggestions that child benefit could be slashed to help balance Britain's books.

Number 10 said the Prime Minister would stick to his pre-election pledge to protect the entitlement for the next five years.

This is despite Mr Duncan Smith asking civil servants to 'model' the impact of a series of cuts to child benefit, as he attempts to find £12billion of welfare savings.

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Plans drawn up by Iain Duncan Smith to limit child benefit to two children were binned by David Cameron today

Proposals included limiting payments to the first two children, as well as cutting benefit for the first child from £20.70 a week to £13.70, the amount paid for subsequent children.

These measures have the potential to save more than £3.5billion from the welfare bill, reducing the need for deep cuts in other areas such as disability benefits and working tax credits.

The Department for Work and Pensions pressed ahead with the modelling despite comments from David Cameron in the run-up to the election which all but ruled out cuts to child benefit.

Yesterday, Number 10 distanced itself from the initiative, saying the Prime Minister would stick to his pledge to protect payments until 2020.

A spokesman said: 'The position on child benefits has not changed. As the Prime Minister said during the election campaign: 'We keep child benefit, we don't cut child benefit'.'

The previous Coalition government axed child benefit for wealthier parents as one of its first austerity measures.

The latest ruling is a blow to Mr Duncan Smith, who argues he is forced to make deep cuts with one hand tied behind his back.

Cameron: 'We will double universal childcare for working parents'

Mr Cameron has already ruled out reducing pensions or cutting the winter fuel allowance and free TV licences for wealthier pensioners. These account for £95billion of the £220billion welfare budget, leaving Mr Duncan Smith to find cuts of around 10 per cent from the £125billion spent on working age benefits.

This means the focus will now turn to areas such as tax credits, housing benefit and disability allowance – which Mr Cameron has ruled out taxing. Internal projections by the DWP show that restricting child benefit to the first two children would save at least £1billion, and possibly as much as £2billion.

Separate analysis by the Institute for Fiscal Studies suggested that cutting benefit to £13.70 a week for the first child would save £2.5billion, at a cost of £360 a year to each family which receives it.

Work and Pensions Secretary Iain Duncan Smith, pictured with the Employment Minister Priti Patel, asked his staff to 'model' what impact reducing the benefit would have

Mr Duncan Smith believes that bold moves on child benefit would be fairer than 'cheese-paring' welfare given to vulnerable groups such as disabled people. But Government sources last night played down the row, saying civil servants routinely draw up policy options on a range of issues.

Ministers have already agreed a two-year benefit freeze in order to save £1.5billion, including a freeze in child benefit payments.

Polling suggests the idea of capping benefits at the first two children is potentially popular.

But Chancellor George Osborne is said to be concerned that the move would send out an anti-aspirational message.

Mr Cameron, who has flirted with the idea of capping child benefit in the past, came under intense pressure from Labour over the issue during the election campaign, with Ed Miliband claiming the future of child benefit was 'on the ballot paper'.

In an ITV interview on May 1 Mr Cameron was asked whether it would be kept 'in the current form for the next five years', and he replied: 'Correct'.