The Staggers

The New Statesman’s rolling politics blog

Will Clegg cave in on freezing benefits?

Lib Dem leader may agree to Osborne's benefits freeze in exchange for a wealth tax.

By George Eaton Published 19 September 2012 8:48

Chancellor George Osborne and Nick Clegg. Photograph: Getty Images.

George Osborne is considering a two-year freeze on most benefits. Photograph: Getty Images.

Last year it was the Liberal Democrats, along with Iain Duncan Smith, who vetoed George Osborne's plan to freeze benefits on the grounds that the poorest should not be squeezed even more. Now, with his deficit reduction programme increasingly off track, the Chancellor has come back for a second try. As I wrote yesterday, Osborne is reportedly considering freezing most benefits for two years and then linking them to wages, rather than prices (the former are expected to rise more slowly than the latter, a sure sign of a depressed economy). The plan would hit the poorest hardest and further depress growth (the poor spend, rather than save, what little they receive) but Osborne, a man with a deficit target to meet, will likely wave away such quibbles.

And it looks as if he may get his way. Today's Sun reports a source close to Clegg as saying, "This is a time of incredible economic challenges and we have to look at all the options available." It's the sort of story perfectly timed to unsettle the Lib Dem faithful as they gather for their annual conference in Brighton this weekend. The party, most of whose activists remain solidly social democratic, has already accepted £18bn of welfare cuts (Osborne is attempting to secure a further £10bn), will it really acquiesce to yet another raid on the poorest? Provided certain conditions are met, the answer is yes. Clegg has openly said that he is willing to agree to further welfare cuts in exchange for some form of wealth tax.

He told the Guardian last month: "The blunt truth is that we will need to find further savings in welfare. It constitutes close to a third of total government expenditure ... Welfare reform does have a continuing role. But that has to be done in a way which starts at the top rather than starts at the bottom."

But if Clegg does want to strike a grand bargain with Osborne he had better make sure it is one worthy of the name. Before the 50p tax rate was abolished, we were told that the Lib Dems would only accept such a move in return for the introduction of a "mansion tax". Yet the rate was scrapped and all Clegg's party received in return was a higher rate of stamp duty on £2m properties and some token action on tax avoidance. In the eyes of the voters, the Lib Dems were complicit in a giveaway to the richest. If Clegg is to avoid relinquishing any more credibility, he must not repeat this error.

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Tags: Nick Clegg George Osborne Liberal Democrats Spending Cuts

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17 comments

Fri, 2012-09-21 14:00 — Fraziel1

Of the 5.9 million, how many are on working age income related benefits? Pensions are to be excluded from any freeze and pensioners have never had it so good with Pernsion credit giving them an income. in many cases, higher than the staff who administrate their benefits.

Fri, 2012-09-21 21:08 — Gareth

Sorry, I should have clarified in my post that the 5.9 million were working age benefit claimants. Let me just say that the tenure of your argument seems to be to compare your wages as a benefit administrator to the levels of support claimants receive. You appear to consider that benefits should be cut to below your salary level, whereas I'd say that your salary (and those of the lowest paid workers) should be higher, certainly high enough to be able to live on. I'm not materialistic enough to believe that our lives are enriched predominantly by owning more plasma-screen TVs, iPads and shoes, but it should not be necessary for anyone in this country to go without the very basic things. I agree with the argument that people should be better off in work than on benefits, but this should mean that work pays better, not that benefits are reduced to the point where they are no longer a satisfactory support for people who need, for a time, a safety net. We need to do more to genuinely help people move off dependency on benefits, not remove the protection that the welfare state offers.

Thu, 2012-09-20 19:25 — Fraziel1

A family with 3 kids on JSA will receive £111.45 p/wk JSa, £150 p/week child tax credit, approx £45 p/week child benefit. If they are in receipt of housing benefit and council tax benefit you can add, at a conservative estimate and the sums could be hugely more depending on the area, £400 - £500 a month. You will not be wealthy on that but it is plenty for food and bills. There is also the problem that families on benefit keep getting paid for every child they have. People in work can't do that and have to cut their cloth. Why should those on benefit not have to do the same?

Thu, 2012-09-20 19:18 — Fraziel1

Gareth, there are over 60 thousand families receiving more than £26000 a year in benefits. The benefits cap is being set at £26000 a year as this is the average salary. There is an argument that even this is too high as the average salary is 26000 before tax. I do not often agree with tories but they are, for once, bang on in dealing with benefits. The idea that families with children will choose between heating and eating really is hysterical rubbish. You just have to look at the amounts of the specific benefits paid to see that.

Thu, 2012-09-20 23:35 — Gareth

You only half-answered my question. There are 5.9 million benefit claimants, so taking your figure, only 1% receive more than the £26,000. While you're clearly concerned with the top 'recipients', I'm concerned about the poorest few. I would hate to see this form of "Daily Mail" rhetoric being passed off as typical of everyone in receipt of benefits when it clearly isn't. To use such a misleading distortion as a way of justifying taking money off people who receive much less cannot be fair in the way you suggest. There are individuals who regularly face the choice between food and warmth, and eroding the value of the benefits to which they are entitled would plunge them further into poverty. How can that be desirable?

Wed, 2012-09-19 22:31 — Rev Graeme Hancocks (not verified)

Well he's caved in on practically everything else, so why should this be any different?

Wed, 2012-09-19 21:25 — Fraziel1

No mention here of how families with children on benefits can often receive far more than they could ever hope to get in work, often more than their neighbours in work and can be quite comfortably off. I deal with cases on a wekly basis where families are receiving the equivalent of 30, 40,50k a year salaries on beenfits. Benefits are there as support, not to give people a standard of living equal to or greater than those in work. In times of plenty you would think the benefits bill would decrease and times of austerity it would increase but under labour it exploded. It was ridiculous. The benefits bill has to be cut and with recent very large rises a freeze and then linking to wages seems perfectly reasonable imo.

Wed, 2012-09-19 23:44 — Gareth

You've mentioned in a few different posts that your job involves dealing with benefit claims, so I'd be interested to know from your experience what proportion of claims involve sums equivalent to £30-£50k; can you honestly say that it's more than a few percent who get these sorts of sums? And what in particular is it that qualifies people to receive this level of benefits? How typical are the examples that you cite?

Wed, 2012-09-19 18:43 — matthew fox (not verified)

If the Government had done this two years ago, they might have got away with it, but any idea of freezing benefits will create a fire storm.

I think it ironic that " Stand on your own two feet " Conservative Priti Patel, who complains about welfare spending, but has no problem the government putting child benefit money into a bank account with her name on it.

Personally there should be an opt out system, when it comes to benefits, if your a wealthy pensioner, you should be able out of opt out and not take the state pension.

And if your Priti Patel, tell the government, you don't want child benefit, because she is against the idea of state spending.

Wed, 2012-09-19 11:28 — nourredine

@ David Holmes,
"I don't see any issues with attaching benefits to average wage increases either, as why should people on benefits have an increase in living standards when the rest of us are struggling?"

Benefits are not a wage, it is a help the government decide on your circonstences, and should not be compared to a wage.
Please compare like with like.

Wed, 2012-09-19 11:24 — Worldismad (not verified)

Yes.

Wed, 2012-09-19 11:21 — lisacat1999 (not verified)

"This is the most right wing goverment since the war"

Agreed. The Lib Dems really have made a difference.

Wed, 2012-09-19 11:18 — Dark Heart of Toryland (not verified)

Merely to pose the question suggests the answer...

Wed, 2012-09-19 10:05 — David Holmes (not verified)

Well Clegg is a Tory bag carrier, along with the rest of the Lib Dems, so he might as well go the whole way and support Gideon on this.

I don't see any issues with attaching benefits to average wage increases either, as why should people on benefits have an increase in living standards when the rest of us are struggling?

Wed, 2012-09-19 13:41 — Gareth

I think it depends on what role you seen benefits as having. If they existed so that everybody could "have a share" in our country's wealth, then yes, it would make sense to link them to wage growth.

But this is not the purpose of benefits. The welfare state is a safety net, designed to ensure that the poorest and most vulnerable in society have a basic standard of living which includes food, accommodation, heating and adequate clothing. Disability allowances are given to ensure that those who require them have their individual basic needs met, and to prevent them from being isolated from society. If the amounts provided did not stay in line with these costs, the welfare system would fail to meet its purpose. Therefore, removing the link with RPI , which measures changes in the cost of living, will render the welfare system unfit for purpose.

While workers on the lowest rates of pay may be in a similar position, many salaried employees can afford a lifestyle at least a certain amount beyond the basic level I've described. For such people with truly disposal income, wage increases might affect what type of holiday they take, how often they eat out, or what car they can drive. For the poorest, the decision would be whether to eat or have the heating on. It is qualitatively a different proposition, and in a nation as prosperous as ours, we should defend the poorest and most vulnerable as a matter of conscience.

Thu, 2012-09-20 13:29 — hay (not verified)

Good for you!

Wed, 2012-09-19 10:17 — Bolshie Dave (not verified)

Because Dave its not a race to the bottom and below inflation rises hit them harder than it hits you. This is the most right wing goverment since the war and this is an ideological change rather than an economic one