Millions of benefit claimants face a real income shortfall next year under plans being considered by ministers.
In a break from convention, the Treasury has put forward cost-cutting proposals to increase benefits next year by less than the rate of inflation.
The September consumer price index, normally used to determine the following year’s benefit levels, showed yesterday that prices rose 6.7 percent compared to last year. But with inflation forecast to fall significantly by the time the increase comes into effect next April, some ministers are pushing for a significantly smaller increase in benefits.
Finance Minister Andrew Griffith declined to say whether benefits would rise by 6.7 per cent next year, saying ministers would need to “assess” the situation before making “recommendations on what to do with public benefits.” “.
He told Sky News: “This process still needs to happen.” It wouldn’t be right to come out straight after the numbers. As you will recall, last year we increased human protection benefits by 10 percent, one of the largest increases ever.
Finance Minister Andrew Griffith (pictured) declined to say whether benefits would rise by 6.7 per cent next year, saying ministers would need to “assess” the situation before “making recommendations on what to do with public benefits.” services have to be done”.
Downing Street said Rishi Sunak (pictured) remains committed to the mechanism that guarantees the state pension rises according to the highest value – income, inflation or 2.5 per cent
Liz Truss sparked a Tory backlash last year when she proposed raising benefits by less than the rate of inflation.
The plan was scrapped when Rishi Sunak succeeded her, resulting in a 10 percent increase in benefit rates.
Several current Cabinet ministers joined the rebellion last year, including Work and Pensions Secretary Mel Stride, Commons Leader Penny Mordaunt and Leveling Secretary Michael Gove.
However, a senior Tory official predicted they could be more willing to accept benefit cuts this year.
“I think what you saw last year was more about opposition to Liz than an ideological commitment to always increasing benefits in line with inflation,” the source said.
“These people are not necessarily going to be in the same position this year.” A source close to Mr. Stride declined to say whether he was committed to raising benefits in line with inflation, saying only that “he will check everything in the usual way”.
Ministers are looking at a range of options to cut costs. Increasing benefits at half the rate of inflation would save taxpayers around £2 billion.
A further £1bn could be saved if premiums were removed from the average earnings figures used to calculate the pension triple lock, giving state pension recipients a rise of 7.5 per cent instead of 8.5 per cent.
Liz Truss (pictured) sparked a Tory backlash last year when she proposed raising benefits by less than the rate of inflation. The plan was scrapped when Rishi Sunak succeeded her, resulting in a 10 percent increase in benefit rates
The Resolution Foundation think tank has predicted that freezing benefit rates would save the Treasury £4.2 billion next year. However, the move would also “increase inequality,” impacting the incomes of nine million people and potentially pushing 400,000 children into poverty.
A source familiar with discussions in the government said a total freeze was unlikely – but confirmed that “live discussions” were taking place on whether to increase benefits by less than the headline inflation rate.
The source highlighted that many of those receiving social benefits have also received one-off living cost payments as well as significant assistance with their energy bills. Ministers are also considering curbing the dramatic rise in the state pension by adjusting the figures used to calculate the triple lock.
Downing Street said Rishi Sunak remains committed to the mechanism that guarantees the state pension rises according to the highest value – income, inflation or 2.5 per cent.
However, sources confirmed that the Treasury is considering proposals to lower the average earnings value used from 8.5 percent by removing the value of one-off bonuses.
The proposal could reduce the increase to 7.5 per cent, which would cost pensioners £2 a week but save the Treasury £1bn a year.
The talks come as Chancellor Jeremy Hunt struggles to balance public finances hit by a £30bn-a-year rise in borrowing costs in next month’s autumn statement – and to free up money for tax cuts before the next election.
Children’s charities have asked Mr Hunt to help families whose finances are “on the brink of crisis”.
In a joint letter, Save the Children, the Trussell Trust, the Joseph Rowntree Foundation, Action for Children, Citizen’s Advice and The Children’s Society called on the Chancellor to “do the right thing” by increasing benefits at least in line with September’s inflation rate .
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