Prime minister Liz Truss has cast doubt on whether benefits will increase in line with inflation, as her predecessor Boris Johnson had promised.
Facing questions from the BBC about whether she would follow through on Johnson’s pledge, Truss emphasised that ministers had a duty to be “fiscally responsible” and reduce debt.
Former chancellor Rishi Sunak had said in May that benefits would go up in line with inflation, as per the Consumer Prices Index measure of price rises set in September 2022. That figure stands at 9.9 per cent, subject to a review by work & pensions secretary, Chloe Smith.
Universal Credit does not by law have to increase in line with inflation, unlike other benefits such as carer’s allowance and disability payments. This has left the government facing a choice as to whether to increase other benefits in line with inflation, or wages.
When quizzed on the issue, Truss told the BBC: “We are going to have to make decisions about how we bring back down debt as a proportion of GDP in the medium term.”
Truss did, however, say that she was “committed to supporting the most vulnerable” and pointed out that an additional £1,200 in support was being provided to poorer households.
“We have to look at these issues in the round,” Truss added.
Leader of the House of Commons and one of Truss’ cabinet ministers, Penny Mordaunt, has said that increasing benefits in line with rising prices “makes sense” and would ensure that “people are looked after” and “can pay their bills”.
Mordaunt said: “We are not about trying to help people with one hand and take away with another.”
The Tory chair of Parliament’s Treasury Committee, Mel Stride, separately said that the “strong real-terms squeeze” already seen on benefits left the government with a “really tough call to make”.
Meanwhile, former work & pensions secretary Damian Green suggested that cutting benefit payments as part of wider spending cuts would be unlikely to pass a Commons vote.
He said: “I think that there will be many of my colleagues who think that when you're reaching for spending cuts, benefit payments are not the way to do it.”
Other senior Conservatives such as Michael Gove and Esther McVey have also indicated that benefits ought to rise in line with inflation.
Opposition MPs also advocate such a move, with Labour shadow chancellor Rachel Reeves calling it a “grotesque” move if the government does not do so.
She said: “The idea that the government can afford to give tax cuts to the wealthiest, but not uprate benefits in line with inflation, I think is grotesque.”
The Truss government’s management of the economy has already come under scrutiny following the recent mini-Budget, in which billions in tax cuts were announced which will largely be funded by borrowing.
Following a fierce reaction from the markets, the government has this week agreed to bring forward the publication of its fiscal plan and the Office for Budget Responsibility’s forecast for the longer-term economic prognosis.
Ministers have also reneged on plans to abolish the top rate of income tax following public outcry, which Truss said was indicative of a “listening government” that considered voters.
