Osborne plans huge cut to benefits again


by Sunny Hundal    
November 3, 2011 at 12:48 am

George Osborne is planning another massive cut in benefits tonight, it was revealed.

Soon after the Chancellor took power, he changed the inflation rate to which benefits were linked to: from RPI to CPI.

Retail Price Inflation is a higher and more accurate rate and currently stands at 5.6%. Consumer Price Inflation stands at 5.2%.

This means that when the rate of benefits is changed every year in April to reflect inflation, the rise will be lower than in the past – further eroding benefits.

But now Osborne is planning to go further by scrapping inflation-linked rises entirely.

The Financial Times reports tonight that:

The FT has learnt that Mr Osborne has asked officials to provide models for a range of alternatives models, including raising benefits in line with average earnings growth of about 2.5 per cent or even freezing some payments altogether.

Iain Duncan Smith, work and pensions secretary, is said to be highly concerned about some of the proposals, especially if it appeared that the government were picking an arbitrary new model or unfairly hitting poor households.
…
“There are no firm proposals on the tables yet, but the issue has become very live,” one government official said. “Iain is not at war with George, but he is worried. It’s highly unlikely we will have a 5.2 per cent across-the-board increase.”

As the paper says, the change will further hit struggling families the hardest.

Worth noting – this proposal was first floated a few weeks ago when the higher inflation figures came in. Osborne is entirely serious about this.


---------------------------
      


About the author
Sunny Hundal is editor of LC. Also: on Twitter, at Pickled Politics and Guardian CIF.
· Other posts by
Filed under
News


88 Comments || Add yours below

  • We have a tight comments policy aimed at fostering constructive debate.
  • We believe in free speech but not your right to abuse our space.
  • Abusive, sarcastic or silly comments may be deleted.
  • Misogynist, racist, homophobic and xenophobic comments will be deleted.
  • Please familiarise yourself with our comments policy.


Reader comments


1. Sevillista

A populist move by Osborne and one that achieves many objectives for him.

1. Earnings growth is lower than inflation – many people will see this move as “fair”.

2. The efforts to call all who claim benefits scroungers and cast doubt on the veracity of the disabilities of those claiming disability benefits has been largely successful.

3. It will ease the upward pressure on the welfare bill the Government’s failed macroeconomic strategy is causing.

4. It will increase labour supply to some degree and thus put further downward pressure on wages for those at the bottom.

On the downside for Osborne, it will mean the Government having to jettison any pretence of interest in the legal child poverty targets, but they are already not credible on this so no big loss to them.

2. Leon Wolfson

2/3. Except it backfires. The money “saved” is money which is NOT being spent directly into the economy by those people, so it immediately hits shops and further depresses consumer confidence, having a major negative effect on the economy AGAIN.

And “increasing” labour supply? How? The mortuary business, perhaps, when people freeze over the winter.

It’s stupid, not “populist”. Only a Tory could love this policy.

3. Sevillista

@leonwolfson

If it becomes impossible to survive on benefits then it surely that will have some impact on labour supply (if not actual employment)?

And the Tories have successfully created the perception that all on benefit are scroungers on £50,000+ a year in many people’s minds. Attacks on benefits to date have been quite popular – why do you think this will change?

4. Leon Wolfson

@3 – What part of “the jobs are not there” don’t you understand? Seriously? We’ve not recovered from the recession.

It’ll push up *crime* for sure.

And it’s pure Corporatism, not populism. Wages will drop as a result, and that’s all the Tories care about.

5. Sevillista

@leonwolfson

It doesn’t matter if the jobs are not there – the increase in labour supply this will
cause will lead to downward pressure on pay and conditions. For Osborne and the people he represents a successful outcome, no?

Increased poverty is, for Osborne, an insignificant price to pay for that.

You misunderstand me if you think I suggest this is a good policy – I am merely explaining why, for Osborne, it is an attractive option

6. JustAnotherVoter

“Earnings growth is lower than inflation”

In the long run, earnings grow faster than prices. That is what economic growth delivers. Linking benefits to a price measure (RPI or CPI regardless) means the living standards of those on benefits progressively falls behind that of those in work over time.

Labour should play the long game here and support uprating benefits by earnings.

7. Leon Wolfson

@6 – That’s the theory. It’s not true, however.

Households have managed to run in place by having two partners with a job each. But now, those people are seeing serious erosion of their living standards anyway.

Making benefits progressively worthless leads to people dying. That’s what you’re advocating. The benefits in this country are threadbare as it is. Now mass social cleansing is on the cards, and I’m quite serious about the government needing to invest in morgues.

8. JW

@Leon Wolfson

You enitrely misunderstand Sevillista.

9. Leon Wolfson

@5 – Fair enough then, I read your posts as support. And it’s not really popularist by the economic definition.

10. Rob

You say “Osborne is planning to go further by scrapping inflation-linked rises entirely.”, then back that up with the FT report that “Mr Osborne has asked officials to provide models for a range of alternatives models, including…freezing some payments altogether.”

In other words, he is not planning to scrap them, its an alternative he’s looking at.

I agree with the general sentiment though, this is an outrageous idea, and I hope that he is exploring it purely for the theoretical hell of it.

11. Tim Worstall

“Labour should play the long game here and support uprating benefits by earnings.”

Good advice….except.

Govts have a long history of playing with these numbers. Way back when, 70s I think, there was a brief period when earnings were falling behind inflation. So ht Labour Govt linked pensions to earnings. A few years later (under Maggie) normality restored and wages rising faster than inflation. Pensions were immediately linked to inflation again.

Note that this is a non-politically partisan observation: all politicians are scumbags who will link benefits/pensions etc to whatever they think best at the time. And when what seems best changes they’ll change it, as they have done in hte past.

12. JustAnotherVoter

@Leon “Making benefits progressively worthless leads to people dying”

I would drop the hyperbole, but that is what you do by uprating by a price index. Earnings went up 40% between 2000 and 2008, whereas RPI went up 26%. Which would you have picked to uprate benefits by?

Darling was *forced* to break the RPI link in the 2010 budget because RPI inflation was negative in Sep 2009.

It really is true that in the long run, earnings rise faster than prices. You are right that the expansion of the labour force has narrowed the gap in recent decades (as a result of that good liberal conspiracy, equal rights for women), but the gap remains.

@Tim: “Govts have a long history of playing with these numbers”

Yup, no argument here, and all that is left is that special interests occasionally emerge to correct the trend. Hence the “grey vote” won the “triple lock” on the state pension.

13. Sally

Remember when he said ” we are all in this together?”

Well, he lied his little toffee nosed head off. Shame the rather stupid lie dems belived him. I guess they want to be irrelevant for the next 100 years.

14. Leon Wolfson

@12 – It’s not hyberbole. It’s entirely and completely true. The benefits we have were threadbare anyway, thanks to non-correction of major cuts made by Thatcher.

Also, they’ve risen in line with actual household earnings quite well, the majority of the “extra” cash has been skimmed off by the rich. But that’s RPI. CPI, what it’s now linked to…well, you may want to look at precisely how much lower THAT is.


Reactions: Twitter, blogs
  1. Miriam Said

    Osborne planning another massive cut to benefits http://t.co/8xTUmhMV

  2. Dr Anne Brunton

    Osborne planning another massive cut to benefits http://t.co/8xTUmhMV

  3. Catherine Brunton

    Osborne plans huge cut to benefits again | Liberal Conspiracy http://t.co/7ik3OpPo via @libcon <war

  4. jbw

    Osborne planning another massive cut to benefits http://t.co/8xTUmhMV

  5. Malcolm Mildren

    #Osborne: Benefits a were pegged to RPI, then CPI & now EARNINGS, at 2.5%. This to apply to all pensions – except MPs.
    http://t.co/wGyJIUxY

  6. Purbeck Pashmina

    Unreal: FT says Osborne is planning to stop linking benefits to inflation entirely – hitting poorest families harder http://t.co/uxN54wyV

  7. Greig Britton

    Unreal: FT says Osborne is planning to stop linking benefits to inflation entirely – hitting poorest families harder http://t.co/uxN54wyV

  8. Watching You

    Osborne planning another massive cut to benefits http://t.co/8xTUmhMV

  9. Ed Watkinson

    Unreal: FT says Osborne is planning to stop linking benefits to inflation entirely – hitting poorest families harder http://t.co/uxN54wyV

  10. salardeen

    Unreal: FT says Osborne is planning to stop linking benefits to inflation entirely – hitting poorest families harder http://t.co/uxN54wyV

  11. Simon Buckmaster

    Osborne planning another massive cut to benefits http://t.co/8xTUmhMV

  12. Stuart Poynton

    Unreal: FT says Osborne is planning to stop linking benefits to inflation entirely – hitting poorest families harder http://t.co/uxN54wyV

  13. Phil Brown

    Unreal: FT says Osborne is planning to stop linking benefits to inflation entirely – hitting poorest families harder http://t.co/uxN54wyV

  14. OccupySL

    Osborne plans huge cut to benefits again | Liberal Conspiracy http://t.co/7ik3OpPo via @libcon <war

  15. Liam Connell

    Remember how last month's inflation meant higher benefits payments? Osborne's plan: stop index-link for benefits http://t.co/9NhFx9UW

  16. FutureLeft

    Osborne plans huge cut to benefits again | Liberal Conspiracy http://t.co/ZLGYm3qL via @libcon

  17. sunny hundal

    Osborne plans to cut benefits again by cutting link to inflation, hitting poorest ppl most http://t.co/uxN54wyV (from last night)

  18. Geoffrey Pearson

    Osborne plans to cut benefits again by cutting link to inflation, hitting poorest ppl most http://t.co/uxN54wyV (from last night)

  19. Ian Beckett

    Osborne plans to cut benefits again by cutting link to inflation, hitting poorest ppl most http://t.co/uxN54wyV (from last night)

  20. Peter Coville

    Osborne plans to cut benefits again by cutting link to inflation, hitting poorest ppl most http://t.co/uxN54wyV (from last night)

  21. Martin

    Osborne plans to cut benefits again by cutting link to inflation, hitting poorest ppl most http://t.co/uxN54wyV (from last night)

  22. Vincenzo Rampulla

    @sunny_hundal: Osborne plans to cut benefits again by cutting link to inflation… http://t.co/1JS3zVCv (from last night) >v.worrying

  23. malcolm

    Osborne plans to cut benefits again by cutting link to inflation, hitting poorest ppl most http://t.co/uxN54wyV (from last night)

  24. Gemma Tumelty

    Osborne plans to cut benefits again by cutting link to inflation, hitting poorest ppl most http://t.co/uxN54wyV (from last night)

  25. Lee Winstanley

    Osborne plans to cut benefits again by cutting link to inflation, hitting poorest ppl most http://t.co/uxN54wyV (from last night)

  26. Janet Graham

    Osborne planning another massive cut to benefits http://t.co/8xTUmhMV

  27. sandratowers59

    Osborne plans to cut benefits again by cutting link to inflation, hitting poorest ppl most http://t.co/uxN54wyV (from last night)

  28. Janet Graham

    Unreal: FT says Osborne is planning to stop linking benefits to inflation entirely – hitting poorest families harder http://t.co/uxN54wyV

  29. Tim Easton

    Osborne plans to cut benefits again by cutting link to inflation, hitting poorest ppl most http://t.co/uxN54wyV (from last night)

  30. ANDREW JENNINGS

    Osborne plans huge cut to benefits again | Liberal Conspiracy http://t.co/aVK6lK7j via @libcon #ConDemsOut #Occupylsx

  31. tracy e

    Osborne plans huge cut to benefits again | Liberal Conspiracy http://t.co/YD2JXUUb via @libcon

  32. Roberto Castro Ruz

    Osborne plans huge cut to benefits again | Liberal Conspiracy http://t.co/YD2JXUUb via @libcon

  33. Karen Laing

    RT @libcon Osborne planning another massive cut to benefits http://t.co/UsfP51i1

  34. j sheeran

    Osborne plans to cut benefits again by cutting link to inflation, hitting poorest ppl most http://t.co/uxN54wyV (from last night)

  35. Janet Graham

    Osborne plans huge cut to benefits again | Liberal Conspiracy http://t.co/VGuEsbwv #ppnews

  36. Matt Jeffs

    Osborne plans to cut benefits again by cutting link to inflation, hitting poorest ppl most http://t.co/uxN54wyV (from last night)

  37. David Taylor

    Osborne planning another massive cut to benefits http://t.co/8xTUmhMV

  38. Janet Graham

    Osborne plans to cut benefits again by cutting link to inflation, hitting poorest ppl most http://t.co/uxN54wyV (from last night)

  39. Fiona Edwards

    Osborne plans to cut benefits again by cutting link to inflation, hitting poorest ppl most http://t.co/uxN54wyV (from last night)

  40. Tara B

    Osborne plans to cut benefits again by cutting link to inflation, hitting poorest ppl most http://t.co/uxN54wyV (from last night)

  41. Pamela Heywood

    Osborne plans huge cut to benefits again http://t.co/849B4nfP

  42. Michael Bater

    Osborne plans huge cut to benefits again | Liberal Conspiracy http://t.co/v0m1cy7i via @libcon

  43. Antonio Barbaro

    Unreal: FT says Osborne is planning to stop linking benefits to inflation entirely – hitting poorest families harder http://t.co/uxN54wyV

  44. 2wolves

    @bendygirl @suey2y http://t.co/lDRAgjfV via @libcon

  45. Grahame Morris

    Osborne plans to cut benefits again by cutting link to inflation, hitting poorest hardest http://t.co/pQJF1gLy via @sunny_hundal

  46. #pressreform

    Osborne plans huge cut to benefits again | Liberal Conspiracy http://t.co/nqcRcng2 via @libcon

  47. Jill Hayward

    Osborne plans huge cut to benefits again | Liberal Conspiracy http://t.co/nqcRcng2 via @libcon

  48. Matt Davies

    Osborne planning another massive cut to benefits http://t.co/8xTUmhMV

  49. Alex Braithwaite

    Osborne plans huge cut to benefits again | Liberal Conspiracy http://t.co/pANMxNl4 via @libcon

  50. Shereef Abdallah

    Osborne plans huge cut to benefits again | Liberal Conspiracy http://t.co/pANMxNl4 via @libcon

  51. Dale Hinch

    Osborne plans to cut benefits again by cutting link to inflation, hitting poorest ppl most http://t.co/uxN54wyV (from last night)

  52. Chris Goulden

    Unreal: FT says Osborne is planning to stop linking benefits to inflation entirely – hitting poorest families harder http://t.co/uxN54wyV

  53. Clare Jordan

    Osborne plans to cut benefits again by cutting link to inflation, hitting poorest hardest http://t.co/pQJF1gLy via @sunny_hundal

  54. bryan

    Osborne plans huge cut to benefits again | Liberal Conspiracy http://t.co/g8lnkxPL via @libcon

  55. Michael Curry

    Unreal: FT says Osborne is planning to stop linking benefits to inflation entirely – hitting poorest families harder http://t.co/uxN54wyV

  56. Rattlecans

    Unreal: FT says Osborne is planning to stop linking benefits to inflation entirely – hitting poorest families harder http://t.co/uxN54wyV

  57. VirtualResistance

    Unreal: FT says Osborne is planning to stop linking benefits to inflation entirely – hitting poorest families harder http://t.co/uxN54wyV

  58. Rattlecans

    Why is Osborne doing this? Neoliberal ideology says no welfare state, that's why. http://t.co/yI6H8Zju

  59. Rosie

    Osborne plans huge cut to benefits again | Liberal Conspiracy http://t.co/j9Zvd7yQ via @libcon

  60. Tentacle Sixteen

    Unreal: FT says Osborne is planning to stop linking benefits to inflation entirely – hitting poorest families harder http://t.co/uxN54wyV

  61. Maggie W

    @bendygirl @suey2y http://t.co/lDRAgjfV via @libcon

  62. Lizzie Charlton

    Gaaaaaah. Tories are dismantling the welfare state one block at a time :/ >> Osborne plans huge cut to benefits again http://t.co/B1LqZdl7

  63. Where's the Benefit?

    Jesus. Another one? RT @libcon: Osborne planning another massive cut to benefits http://t.co/MMtqE17v

  64. fairywishes

    Jesus. Another one? RT @libcon: Osborne planning another massive cut to benefits http://t.co/MMtqE17v

  65. Stephen Budden

    RT @BrokenOfBritain: Osborne plans huge cut to benefits again | Liberal Conspiracy http://t.co/ejMnAyNd

  66. SERTUC Young Members

    RT @BrokenOfBritain: Osborne plans huge cut to benefits again | Liberal Conspiracy http://t.co/LDEonDPJ

  67. 2wolves

    What a disgusting human being MT @sunny_hundal: Unreal: FT says Osborne planning to stop linking benefits to inflation http://t.co/5Bjo0age

  68. Ebony Dawn Marsh

    What a disgusting human being MT @sunny_hundal: Unreal: FT says Osborne planning to stop linking benefits to inflation http://t.co/5Bjo0age

  69. Peter Underwood

    Osborne plans to cut benefits again by cutting link to inflation, hitting poorest ppl most http://t.co/uxN54wyV (from last night)

  70. Paul Winter

    Osborne plans huge cut to benefits again | Liberal Conspiracy http://t.co/V4OGD9Uy via @libcon

  71. Shalim

    Osborne plans to cut benefits again by cutting link to inflation, hitting poorest ppl most http://t.co/uxN54wyV (from last night)

  72. liane gomersall

    Osborne plans huge cut to benefits again | Liberal Conspiracy http://t.co/XPIrvkPl via @libcon

  73. Rebecca Boot

    George Osbourne's plans to remove the link between inflation&benefits. http://t.co/CgbesQLf #cuts #wrb

  74. Les Tricoteuses

    Don't be affraid to make these kinds of postings folks. I don't always see things. http://t.co/cMQHyqjU





  • We have a tight comments policy aimed at fostering constructive debate.
  • We believe in free speech but not your right to abuse our space.
  • Abusive, sarcastic or silly comments may be deleted.
  • Misogynist, racist, homophobic and xenophobic comments will be deleted.
  • Please familiarise yourself with our comments policy.

 
Liberal Conspiracy is the UK's most popular left-of-centre politics blog. Our aim is to re-vitalise the liberal-left through discussion and action. More about us here.

You can read articles through the front page, via Twitter or RSS feed. You can also get them by email and through our Facebook group.
RECENT OPINION ARTICLES




How useful is Tesco’s u-turn on Workfare?
62 Comments



Watch: Obama sings the blues at White House
15 Comments



Why is YouGov’s Kellner endorsing the NHS bill?
23 Comments



‘Move Your Money’ planned against RBS
10 Comments



Rupert Murdoch cheers Rick Santorum to win
24 Comments



Labour: public pay won’t be frozen entirely
19 Comments



Revealed: That ‘dossier’ on Progress
17 Comments



Is Guardian as bad as Tesco on experience?
83 Comments



Bigots launch coalition against gay marriage
204 Comments



Revealed: other companies benefit from ‘work experience’
85 Comments



 LATEST COMMENTS
» Bob B posted on Workfare - what does the evidence show?

» Spike1138 posted on The real agenda behind Telegraph's abortion investigation

» supermarketsweep posted on Job snob? No, I've got the T-shirt

» TimJ posted on The real agenda behind Telegraph's abortion investigation

» cjcjc posted on The real agenda behind Telegraph's abortion investigation

» Chaise Guevara posted on The real agenda behind Telegraph's abortion investigation

» TimJ posted on The real agenda behind Telegraph's abortion investigation

» cjcjc posted on Ten weeks to London's election: where Ken needs to improve

» Planeshift posted on Workfare - what does the evidence show?

» Spike1138 posted on The real agenda behind Telegraph's abortion investigation

» pagar posted on The real agenda behind Telegraph's abortion investigation

» TimJ posted on The real agenda behind Telegraph's abortion investigation

» TimJ posted on The real agenda behind Telegraph's abortion investigation

» Sheila Taylor posted on Revealed: That 'dossier' on Progress

» Michael Swann posted on Bigots launch coalition against gay marriage