Poverty campaigners have said it would be “morally indefensible” for ministers to fund tax cuts for the richest on the backs of the poor, amid speculation that ministers may reduce welfare benefits in the wake of last week’s ill-received fiscal statement.
Friday’s mini-budget announced billions of tax cuts benefiting high earners, but the subsequent market fallout plunged the UK’s finances into near crisis. The government is expected to have to make tens of billions of pounds of public spending cuts later this year to try to put the UK’s finances on a sound footing.
With prime minister Liz Truss having made high-profile political commitments to increase defence and NHS spending, welfare is seen as a prime candidate for cuts.
On Thursday the chancellor, Kwasi Kwarteng, refused to confirm that the government would stick to a promise made in May by his predecessor, Rishi Sunak, that benefits would be uprated by the September rate of inflation.
Raising benefit rates next April by less than the September rate of CPI inflation – likely to be about 10% – would save billions for the Treasury, but would be likely to increase poverty and hardship for low-income families already struggling with the cost of living crisis.
The Resolution Foundation thinktank estimated that raising benefits in line with earnings – about 5% – rather than inflation would save the government £11bn next year, but would leave a couple with two children more than £1,061 a year worse off, and a single parent with one child £607 a year out of pocket.
Any cuts would follow a year in which benefits were uprated in April by 3.1% – linked to the September 2021 inflation rate – despite inflation having soared to about 9%. This resulted in the biggest fall in the real value of the basic rate of unemployment benefits in 50 years.
“Many people across the UK will agree it is morally indefensible that the prime minister would choose to give tax cuts to the richest funded on the backs of the poorest in our society,” said Iain Porter, senior policy adviser at the Joseph Rowntree Foundation charity.
Child Poverty Action Group chief executive Alison Garnham said: “Struggling families will not forgive a chancellor who comes to them for efficiency savings when their cupboards are already bare.”
Philippa Stroud, a Tory peer and head of the Legatum Institute thinktank, said hard policy choices made by the government should not be taken on the backs of the poorest. “This is a matter of basic human dignity. We have to take care of the most vulnerable at times of bumpy transitions in society. This is what government exists to do,” she told the Guardian.
Legatum estimates that despite energy price caps, 1.5 million additional people in the UK will be pushed into relative poverty this winter, bringing the total to 15.5 million. Real-terms cuts to benefits would probably further drive up poverty rates, which are already at their highest level this century.
James Taylor, director of strategy at the disability equality charity Scope, said: “If the government U-turns on this promise, it would be devastating, and lead to disabled people starving and freezing in their own homes.”
Governments are legally obliged to annually raise some disability benefits in line with prices, but have far more discretion when it comes to working-age benefits such as universal credit. The convention is to raise these in line with CPI inflation, but this is often flouted, for example when the government froze benefits for four years in 2016.
A Department for Work and Pensions spokesperson said: “The secretary of state commences her statutory annual review of benefits and state pensions in the autumn using the most recent prices and earnings indices available.”
