Back in September, Nick Clegg said he would block any attempt by George Osborne to freeze benefits in this week’s autumn statement. This put the chancellor in something of a quandary. He had been hoping to save several billions with the move, as well as winning the support of a public that is increasingly hostile to people who are claimants.
Another option remains on the table, however, is to allow benefits to rise, but not by as much as they would normally do if the link with inflation is kept. New analysis from the Institute of Public Policy Research suggests there could still be a fair amount of savings to be gained, for example, by increasing them by just 1 per cent.
The IPPR has produced a table of savings from possible options open to the chancellor:
If we assume Clegg will successfully block the freeze, that leaves the bottom half of the table open to the chancellor. The right hand of this however, is not possible, as pensions are protected by the so-called “triple-lock”, which guarantees a minimum uplift in pensions of 2.5 per cent a year.
So this leaves restricting only out-of-work benefits, which might seem fairer, but doesn’t save very much – just £183m in the first year. Instead, the most likely option looks like the middle column – restricting all benefits by that amount. This would raise £894m in the first year, and £3.5bn by 2016-2017. That would be enough, for example, to cover nearly a year’s freeze in fuel tax.
UPDATE: When Osborne does announce his move on benefits, it might be worth noting this quote from Iain Duncan Smith from 1998 when he was shadow social security secretary:
Clearly, it is a straightforward and traditional uplift in line with two measures of inflation, and it would therefore be wrong for anybody in the House to try to block it. It deals with those in need, and it is only fair that those payments should be made at the earliest opportunity. I therefore welcome the order and make no bones about it.
I doubt the work and pensions secretary will raie any such concerns this time.
Jim Pickard
Kiran Stacey