The prospect of real-terms cuts to benefits in the government’s autumn statement has been described as “catastrophic” for families, after it was suggested that Jeremy Hunt was considering the move to make space for pre-election tax reductions.
Sources close to the chancellor declined to deny a report by Bloomberg that he was considering breaking with the tradition of lifting working benefits in line with inflation.
A spokesperson for the Department for Work and Pensions said the government had increased benefits by more than 10% this year “in order to protect the most vulnerable from the impact of high inflation”.
“As is the usual process, the secretary of state will conduct his statutory annual review of benefits and state pensions in the autumn, using the most recent data available,” the spokesperson added.
The Bloomberg report, which cited people close to Hunt, said real-terms benefits cuts were among cost-saving options being drawn up for the chancellor before the autumn statement, scheduled for 23 November.
Stephen Timms, the chair of parliament’s work and pensions committee, said: “This ought to be unthinkable, at a time when food bank demand is still rising and a Conservative-led report, by the Poverty Strategy Commission, has made the case for increasing benefits.
“Unfortunately it isn’t unthinkable – and the convention of raising benefits in line with inflation has been broken in many of the years since 2010, reducing the headline rate of benefits, before the 2023 uprating, to the lowest in real terms for 40 years and, as a proportion of average earnings, to the lowest ever.”
The Labour party declined to comment on tax speculation.
Rebecca Long-Bailey, a former shadow chief secretary to the Treasury, said: “If Jeremy Hunt is genuinely considering cutting benefits for the most vulnerable in society then that is wholly unacceptable.
“It’s also clear that people are still struggling with a cost of living crisis on top of soaring energy costs. It would be catastrophic for families.
“This would be morally unacceptable but also it just would not yield an economic benefit as it would lead to people having to lean more on services and reach out for assistance. I would hope that our position in the Labour party would be to oppose this if it does materialise.”
Hunt last month played down the prospect of pre-election tax cuts despite news that the public finances were in less bad shape than the government’s spending watchdog had forecast in the spring budget.
Stronger tax receipts from an economy that has so far avoided recession meant the UK’s budget deficit stood at £4.3bn in July – the fifth highest for a July since modern records began in 1993 but £1.7bn below the estimate from the Office for Budget Responsibility.
Treasury sources on Thursday would not comment on the record on tax changes “outside of a fiscal event”, but said the fiscal position was tight as a result of borrowing high sums to support households and businesses throughout the pandemic and the energy crisis.
Sources close to former prime minister Liz truss eagerly flagged up the report, stressing that it was very much part of her plan to kickstart economic growth last year, when she wanted to raise benefits in line with wages rather than with inflation.
