Government denies £2.5bn sickness benefits cut agreed
The letter was written by Chancellor George Osborne on 19 June
The Department for Work and Pensions has dismissed a report that ministers have agreed to cut £2.5bn from benefits paid to those who are too sick to work.
Labour has seized on a story in the Observer newspaper to claim the coalition government is targeting the most vulnerable people in the country.
But a government spokeswoman said the figure, revealed in a leaked letter in the paper, was "totally out of date".
She said negotiations on the Employment and Support Allowance were continuing.
[Only registered and activated users can see links. ] - written by Chancellor George Osborne to Work and Pensions Secretary Iain Duncan Smith on 19 June - Mr Osborne said an agreement had been reached to impose cuts on the budget for Employment and Support Allowance (ESA) - the successor to incapacity benefit.
'No figure agreed'
Mr Osborne writes: "Given the pressure on overall public spending in the coming period, we will need to continue developing further options to reform the benefits as part of the spending review process in order to deliver further savings, greater simplicity and stronger work incentives.
"Reform to the Employment Support Allowance is a particular priority and I am pleased that you, the prime minister, and I have agreed to press ahead with reforms to the ESA as part of the spending review that deliver net savings of at least £2.5bn by 2014/15."
In the newspaper, Yvette Cooper, shadow work and pensions secretary, said the letter showed "the Tories and Liberal Democrats have clearly agreed to hit most heavily those they think will find it difficult to fight back".
Jim Knight, shadow employment minister, said the coalition was "conspiring to take thousands of pounds from the most vulnerable in our communities".
"This exposes George Osborne's rhetoric about living on benefits as a 'lifestyle choice', as being a smokescreen to hide vicious cuts on the poorest.
"It also shows that Iain Duncan Smith will cave in to the Treasury rather than deliver the sensible long-term reforms he talks about," he told the paper.
A Department for Work and Pensions spokesman said "no figure had been agreed" and the letter was "part of the ongoing negotiations" taking place ahead of the spending review.
She said the government was committed to ensuring that those that were genuinely too poorly or disabled to work would receive the support they needed.
October's spending review is likely to be the toughest in a generation, with most government departments having been told to prepare packages of cuts worth between 25% and 40%.
BBC political correspondent Carole Walker said there seemed to be a feeling the Treasury was "keen to step up pressure".
"There seems to be a suspicion this was part of an effort by Chancellor George Osborne to bounce Iain Duncan Smith into some pretty hefty savings on the welfare budget," she said.
Earlier this week George Osborne announced that the annual welfare bill would face further cuts of £4bn, in addition to the £11bn announced in June's budget.
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