Millions of benefit claimants face real pressure on their incomes next year, under plans being considered by ministers.
Breaking convention, the Treasury Department has made cost-cutting proposals to increase benefits by less than inflation next year.
The September consumer price index, which is normally used to determine the following year’s benefit level, yesterday estimated annual price increases at 6.7 percent. But with inflation expected to fall sharply by the time the increase comes into effect next April, some ministers are pushing for significantly less benefit increases.
Finance Minister Andrew Griffith refused to say whether benefits would rise by 6.7 percent next year, saying ministers would need to “assess” the situation before making “recommendations on what to do with public benefits”.
He told Sky News: “That process still needs to happen. It would not be right to come out immediately after the figures. As you will recall, last year we increased benefits by 10 percent to protect people, one of the largest increases ever seen in that area.”
Finance Minister Andrew Griffith (pictured) refused 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’ .
Downing Street said Rishi Sunak (pictured) remained “committed” to the mechanism, which guarantees the state pension will rise in line with whichever is higher: earnings, inflation or 2.5 percent.
Liz Truss sparked a Tory backlash last year when she proposed increasing benefits by less than inflation.
The plan was abandoned when Rishi Sunak succeeded her, leading to a 10 percent increase in benefit rates.
Several current ministers joined the rebellion last year, including Work and Pensions Secretary Mel Stride, Commons leader Penny Mordaunt and Leveling-Up Secretary Michael Gove.
But a senior Tory figure predicted they may be more willing to accept a benefit squeeze this year.
“I think what you saw last year had more to do with backlash against Liz than with an ideological commitment to always increasing benefits in line with inflation,” the source said.
“You won’t necessarily see those people taking the same position this year.” A source close to Mr Stride declined to say whether he was committed to increasing benefits in line with inflation, saying only that “he will assess everything in the usual way”.
Ministers are examining a range of cutback options. Increasing benefits by half the rate of inflation would save taxpayers around £2 billion.
A further £1 billion could be saved by removing bonuses from the average income figures used to calculate the triple lock pension scheme, giving state pension recipients a 7.5 per cent increase instead of 8.5 per cent.
Liz Truss (pictured) sparked a Tory backlash last year when she proposed increasing benefits by less than inflation. The scheme was abandoned when Rishi Sunak succeeded her, leading to a 10 percent increase in benefit rates
The Resolution Foundation think tank has predicted that freezing benefits would save the Treasury £4.2 billion next year. But it is said the move would also “increase inequality”, hitting the incomes of nine million people and potentially pushing 400,000 children into poverty.
One source familiar with the government discussions said a total freeze was unlikely, but confirmed that “live discussions” were taking place over whether benefits should be increased by less than the nominal inflation rate.
The source highlighted that many of those receiving benefits had also received one-off payments for living costs, as well as substantial help with their energy bills. Ministers are also considering whether they can trim a huge rise in state pensions by adjusting the figures used to calculate the triple lock.
Downing Street said Rishi Sunak remained “committed” to the mechanism, which guarantees the state pension will rise in line with whichever is higher: earnings, inflation or 2.5 percent.
But sources confirmed that the Treasury is considering proposals to reduce the average profit figure by 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 £1 billion a year.
The talks come as Chancellor Jeremy Hunt battles 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 elections.
Children’s charities have asked Mr Hunt to help families whose finances have been ‘pushed to the brink’.
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 urged the Chancellor to ‘do the right thing’ by increasing benefits, at least in line with September’s inflation rate.
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