Liz Truss said she has to take a “responsible” approach to the public finances, as she faces a fresh battle with Tory rebels over the level of benefits. The Prime Minister has so far refused to confirm whether benefits will be uprated in line with soaring inflation, meaning some of the poorest households could face a real-terms cut in their income.
Critics who forced Ms Truss and Chancellor Kwasi Kwarteng to perform a humiliating U-turn over the plan to abolish the 45p tax rate for top earners are now stepping up pressure on the Government to confirm that benefits will increase to match rising prices.
Ms Truss said she is “committed to supporting the most vulnerable” but “we have to be fiscally responsible”. Benefits are usually uprated in line with the consumer price index (CPI) rate of inflation from September, with the rise coming into effect the following April.
The Institute for Fiscal Studies estimates that each percentage point rise in CPI adds £1.6 billion to welfare spending. Ms Truss told BBC Radio 4’s Today programme: “We are going to have to make decisions about how we bring down debt as a proportion of GDP in the medium term.
“I am very committed to supporting the most vulnerable; in fact, in addition to the energy price guarantee we’re also providing an extra £1,200 to the poorest households. So we have to look at these issues in the round, we have to be fiscally responsible.”
Former Cabinet ministers Michael Gove and Damian Green have already spoken out with concerns about any failure to raise benefits in line with inflation. And Mel Stride, Tory chairman of the Treasury Select Committee, said he would have to “think long and hard” if asked to vote to increase benefits in line with earnings rather than inflation.
Mr Stride told Today: “The last time the benefits were uprated, because of the way the mechanism works they’re uprated in April but they’re pegged against the previous September’s inflation, and the way it worked last time was the uprating was just 3.1% because inflation was low the previous September, but of course inflation was much higher than that (in April).
“So we’re coming off the back actually of a kind of quite a strong real-terms squeeze on those benefits already so I think that will be a really tough call to make.”
