Govt may stop benefits rising with inflation

  • The government is considering ending the automatic annual increase in benefits in line with inflation. If implemented, the move would see many benefits frozen for two years, then rising only in line with average pay.

    In recent years inflation has risen at a far higher rate than average earnings - Whitehall officials say a switch since 2008/9 would have saved £14bn.

    The government needs to find £10bn of extra savings in the welfare budget.

    Newsnight understands that the new £14bn figure is entering into fractious government debate over how to make a further cut to the welfare budget - something occupying minds at the top of government.

    Liberal Democrat resistance


    The move, under which millions of claimants' benefits would eventually inch up at the same pace as average earnings, would affect a wide range of working-age benefits including jobseeker's allowance and housing benefit.

    Chancellor George Osborne has told the Department for Work and Pensions (DWP) it must come up with the extra £10bn reduction to allow cuts to other government departments, due to begin in 2015, to stay at the level they are now, rather than go deeper.

    Mr Osborne tried to refashion the link between benefits and inflation last September when inflation came in at an unusually high level - 5.2% - but he was beaten back by an alliance of the Liberal Democrats and the Work and Pensions Secretary Iain Duncan Smith.

    But the possibility of freezing benefits will anger Liberal Democrat activists as they prepare to gather in Brighton this weekend for their annual conference.

    Many in the party believe the coalition should find the further £10bn of cuts through tax rises such as wealth taxes and there should be no further cuts to welfare.

    An increasing number believe the welfare budget is already straining to bring in its current £18bn of cuts.

    Historically benefits have often risen by less than wages, with inflation not typically as high as in recent years, and it is already falling this year.

    Benefits freeze

    One option now being weighed up inside government is the freezing of 90% of benefits - which officials estimate would make savings of £7bn in one year.

    However, coalition sources suggest this is likely to be discounted as too harsh, since it would include disability benefits.

    Senior figures are proposing a two-step change to the payment of benefits. At first there would be a freeze to a wide range of working-age benefits to last for two years. After that a new link would be introduced between benefit payments and increases in wages.

    Officials said they did not want a huge increase in benefits should wages start to climb very sharply, so work was being done on the exact linking mechanism.

    The IPPR think tank has estimated that had benefits been linked to earnings, not inflation, over the last few years, jobseeker's allowance would be a weekly £66.81 rather than £71.

    Sources said they were mindful of the risk of pushing benefit claimants into poverty, but that there was potential for massive savings.

    One benefit which will not be affected is the state pension. Pensions are now protected by a "triple lock" which means they will go up annually by either inflation, earnings, or 2.5%, whichever is higher.

    Having introduced this measure, the coalition will not touch it. But all other benefits are not protected in this way.

    Source: BBC News

Related articles

  • Read More

    NHS BOSS SETS OUT A CASE FOR CASH BOOST

    The speech by Mr Stevens at the NHS Providers' annual conference of health managers is being made at the time when three reputable health think-thanks- the Health Foundation, the King's Fund and the...

  • Read More

    THERESA MAY PLEDGES TO REPLACE THE MENTAL HEALTH ACT 1983

    According to Ms May, the new bill would introduce the following:According to the Tories, the proposals were described as the biggest change to mental health treatment law in over 30 years.Ms May...

  • Read More

    THE PRESENT FIRST PRIME MINISTER OF SCOTLAND IS TO PLEDGE AGAINST ANY PLANS TO PRIVATISE THE NHS

    It is also expected that Sturgeon will do the following as proof of her party's commitment to fighting against further austerity:Sturgeon said this before Tuesday's manifesto launch:"While the polls...

  • Read More

    402 MILLION POUNDS WILL BE INVESTED IN COUNCILS WITH THE GREATEST HOMELESSNESS DEMAND FROM APRIL 2017

    Presently, funding is only used for homeless households and not for the prevention of homelessness in the first instance.The funding by the Department for Communities and Local Government is set to...

  • Read More

    RULES AROUND PERSONAL INDEPENDENCE PAYMENTS MAY CHANGE ON THURSDAY

    Ministers have advised chief executives of over 30 charities which claimed that people will be left without vital financial support, to restrict access to a disability benefit.The Disability Benefits...

  • Read More

    THE GOVERNMENT HAS BEEN URGED BY THE BMA TO INCREASE HEALTH SPENDING BY 10 BILLION POUNDS

    This increase in health spending to a proportion of GDP that matched that of the 10 leading economies across Europe could pay for at least 35,000 extra beds a day and many more GP's, according to the...

  • Read More

    MANY DOMESTIC VIOLENCE REFUGES AT RISK OF CLOSING DUE TO HOUSING BENEFIT CAP

    Women who have been victims of domestic violence as well as their children are at risk of falling into the hands of their violent partners if the government caps housing benefit in the social sector...

  • Read More

    Data on disability benefits refused by DWP

    DWP officials have refused a second request for basic information on disability benefits using the “Section 22” exemption they used previously, reports The Independent.The Department had been...

  • Read More

    UN to investigate how welfare reforms will affect disability rights

    A disability charity in Scotland has said it’s been contacted by the UN’s Committee on the Rights of Persons with Disabilities as part of an inquiry into Britain’s treatment of people with...

  • Read More

    Benefit cuts affecting 48,500 families in Liverpool

    Analysis from Liverpool City Council has found that around 48,500 households are likely to lose their benefits due to new government reforms, reports the Liverpool Echo. Councillor Jane Corbett has...

Briefing Signup

 
Quick Contact

Quick contact

Close

Contact us

T 0333 332 1991 (Local rate)

E info@supportsolutions.co.uk