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18 November 2011updated 12 Oct 2023 10:12am

Osborne squeezes benefits again

Benefits will not be raised in line with September inflation in order to cut fuel duty.

By George Eaton

It is indicative of George Osborne’s political beliefs that when forced to choose between squeezing the rich and squeezing the poor, he squeezes the poor. Having already cut welfare payments by uprating benefits in line with the Consumer Price Index rather than the (generally higher) Retail Price Index (see James Plunkett’s Staggers blog on the coalition’s “£11bn stealth cut“), a move that cost families hundreds of pounds a year, he has changed the rules again.

I speculated last month that higher-than-expected inflation meant benefit payments would not be uprated in line with September’s figures (when CPI inflation stood at 5.2 per cent) but a lower set of figures. Today’s Times (£) confirms that Osborne is planning to do just this. Rather than increasing benefits in line with September inflation (as is traditional), he will increase them in line with a six month average (currently 4.5 per cent). Osborne has wisely exempted pensioners’ benefits from the move – no government can afford to alienate the grey vote – but the policy change will still save the government around £1bn a year.

The money will reportedly be used to scrap the planned 3p rise in fuel duty this January, a populist measure that makes a mockery of the government’s claim to be the “greenest ever”. Moreover, it will do nothing to help the poorest, many of whom cannot afford to use a car. It is they who will suffer most from a real-terms cut in benefits. Those receiving disability benefits, carer’s allowance, income support and jobseeker’s allowance, will lose £50 to £100 a year. As Alison Graham, the chief executive of the Child Poverty Action Group, points out:

Increasing benefits below inflation will mean even more poor families having to choose between heating and eating. The costs of heating and electricity have gone up well ahead of inflation, with electricity up by around 10 per cent and gas up by around 15 per cent, so the Government should consider above-inflation increases to protect the health and well-being of children.

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With unemployment at a 17-year high, the government should be increasing, not reducing benefits, a policy for which there is an economic as well as a moral case. Low earners spend a greater proportion of their disposable income than high earners and stimulate growth as a result. Once again, Osborne has adopted a policy that is neither economically wise nor socially just.

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