Universal Credit and other benefits will fall in real terms under Government plans designed to show that the economy is safe and stable, reports The Telegraph. Prime Minister Liz Truss and Chancellor Kwasi Kwarteng has said they will not reverse the tax-cuts announced in the mini-Budget a week ago, and will instead squeeze public spending.
After the announcements of tax cuts and Government borrowing last week the UK economy was thrown into turmoil, with the value of the pound dropping and the Bank of England having to intervene. Yesterday Mr Kwarteng refused to say that Universal Credit and other benefits will be increased to match inflation - which could go over 10%.
Instead the benefits are expected to rise by just 5.4% - meaning in real terms they will be cut because the amount they increase will be much lower than the rate at which everything is getting more expensive. Think tank the Resolution Foundation said the uprating of benefits by earnings instead of inflation next year would cost a typical low-income working family with two children over £1,000 a year.
Torsten Bell, chief executive of the Resolution Foundation, said: “Without U-turns on some tax cuts, the Chancellor has eight weeks to decide which unpleasant combination of growth-reducing public investment cuts or income-reducing welfare cuts he is going to announce.
“The UK is not unique in experiencing tough economic times amid rising prices and interest rates.
“But it has uniquely chosen to make things significantly worse through its own policy choices.
“The intention may have been to emulate Margaret Thatcher, but the reality may involve looking a lot like George Osborne in the years ahead.”
Ministers have said pensions will rise in line with inflation. The Prime Minister and Chancellor are to hold emergency talks with the Office for Budget Responsibility on Friday.
Iain Porter of anti-poverty charity the Joseph Rowntree Foundation said: “Those who will lose out if the Government continues down this track include people with low earnings, families with children, carers and people who are sick or disabled.”
