PRIME Minister Liz Truss has refused to rule out real-terms benefit cuts in order to help pay for her government’s tax-cutting growth plan.
Critics who forced a U-turn over the plan to abolish the 45p tax rate for top earners are now stepping up the pressure on the Government to confirm benefits will be raised.
Commons leader Penny Mordaunt has publicly backed increasing them in line with inflation so that people can pay their bills amid the cost-of-living crisis.
Downing Street has not denied suggestions that Truss could resist rebels’ pressure to increase benefits in line with earnings, which are expected to be much lower than inflation.
Chancellor Kwasi Kwarteng has already made a second change of course to reassure markets and Tory rebels by bringing forward his medium-term fiscal plan along with independent forecasts.
Truss has committed to increase pensions in line with prices but on benefits she said “we have to be fiscally responsible”.
In an interview pre-recorded on Monday, Truss told Tuesday’s BBC Radio 4’s Today programme: “We are going to have to make decisions about how we bring down debt as a proportion of GDP in the medium term.
“I am very committed to supporting the most vulnerable; in fact, in addition to the energy price guarantee we’re also providing an extra £1200 to the poorest households.
“So we have to look at these issues in the round, we have to be fiscally responsible.”
Benefits are usually uprated in line with the consumer price index (CPI) rate of inflation from September, with the rise coming into effect the following April.
The Institute for Fiscal Studies estimates that each percentage point rise in CPI adds £1.6 billion to welfare spending.
Truss told LBC radio that “no decision has been made yet on benefit uprating”, adding that it “will be taken in due course”.
She was then pressed on why she committed to increasing pensions but not benefits. Truss added: “What I mean is when people are on a fixed income, when they are pensioners, it is quite hard to adjust.
“I think it’s a different situation for people who are in the position of being able to work.”
Mordaunt, who ran against Truss in the Tory leadership contest, said it “makes sense” to increase benefits in line with inflation.
She told Times Radio: “I’ve always supported, whether it’s pensions, whether it’s our welfare system, keeping pace with inflation. It makes sense to do so. That’s what I voted for before and so have a lot of my colleagues.
“We want to make sure that people are looked after and that people can pay their bills. We are not trying to help people with one hand and take away with another.”
Tory chairman of the Treasury Select Committee Mel Stride said he would need to “think long and hard” if asked to vote to increase benefits in line with earnings rather than inflation.
He told Today: “The last time the benefits were uprated, because of the way the mechanism works they’re uprated in April but they’re pegged against the previous September’s inflation, and the way it worked last time was the uprating was just 3.1% because inflation was low the previous September, but of course inflation was much higher than that (in April).
“So we’re coming off the back actually of a kind of quite a strong real-terms squeeze on those benefits already so I think that will be a really tough call to make.”
