Most state benefits will rise by only 1 per cent over the next three years to save £3.7bn in a new round of welfare cuts. The Chancellor was accused of demonising claimants as “feckless” and “scroungers” as he contrasted them with “strivers” who worked hard.
George Osborne said that out-of- work benefits had risen by 20 per cent since 2007, twice as much as earnings. “That’s not fair to working people who pay the taxes that fund them,” he said. “Fairness is about being fair to the person who leaves home every morning to go out to work and sees their neighbour still asleep, living a life on benefits.”
From next April, jobseekers’ allowance, employment and support allowance for the sick, income support and tax credits will increase by 1 per cent for three years.
Payments for the disabled and carers will not be affected because that was seen as too politically explosive after the Paralympic Games. They will continue to rise in line with the consumer prices index, and will go up by 2.2 per cent in April.
The basic state pension, protected by a separate formula, will rise by 2.5 per cent in April to £110.15 a week for a single pensioner.
The Liberal Democrats blocked Mr Osborne’s initial proposal for a total freeze on most benefits. But they backed below-inflation rises on the grounds that public sector pay rises had also been capped at 1 per cent.
But Labour and pressure groups warned that most of those affected were not the unemployed but people in work whose wages were topped up by the state – including 3.7m people on child tax credit and 2.5m on working tax credit.
The think-tank the Resolution Foundation said 60 per cent of those hit by the latest squeeze were in work. Gavin Kelly, its chief executive, said: “The majority of the cuts made to benefits and tax credits announced today will come from working households – it’s completely wrong to say that today was all about helping so-called strivers.”
The below-inflation benefit rises will require legislation, and the Conservatives were quick to challenge Labour to say whether its MPs would back the measure in a key vote in the new year. Ed Balls, the Shadow Chancellor, attacked the move as “really unfair”. Labour officials accused Mr Osborne of setting a “trap” for Labour in the hope of presenting it as “soft” on benefit cuts if it opposed the proposal.
Groups representing families condemned the decision to break the link between benefits and inflation. Anne Marie Carrie, chief executive of Barnardo’s, said: “Yet again, it is children from impoverished families who are unfairly suffering most under the government’s austerity measures. The Chancellor has ensured a bleaker and bleaker future for Britain’s poorest families.
“Families most in need will not only lose out on as much as £140 next year and despair to see their benefits increase by a meagre 1 per cent over three years, but the safety net for the poorest could be weakened forever if new legislation on uprating goes ahead.”
Alison Garnham, chief executive of Child Poverty Action Group, said: “The bottom line is that the decisions taken by the Chancellor will plunge tens of thousands more children into poverty whether their parents are working, unemployed, sick or disabled.”
Case study: Child benefit freeze is a blow as we often have to go without
Imogen Dangerfield, 39, is a charity worker. She lives with her partner and their 17-month-old son in Ipswich.
I wasn’t impressed by the fact child benefit won’t increase until 2014. My partner and I aren’t destitute by any means, but we often have to go without things other people take for granted, and we’ve started buying from the value range at supermarkets. Having a child is expensive, and nappies and childcare costs a fortune. The prices of vegetables have shot up, but more than anything it’s the energy bill that makes life more difficult. We never have any savings left at the end of the month.
“George Osborne talks about how he wants to help people who work, but I worked out that I’m only just better off working than staying home. I earn £11,000 and my partner gets £25,000, and apparently that means we’re too rich to get tax credits. But that’s not the case. Whenever I hear someone say: “Oh, we have to go on holiday in Spain this year,” I think: “Wouldn’t that be nice!” My partner works in the public sector, so on top of everything we’ve had to deal with a pay freeze, and now he will have to pay more into his pension.”
Case study: We fear things will go from bad to even worse
Beth Greene, 57, from Livingston in Scotland, is deafblind. She used to run a cleaning contract business before becoming disabled
“I have no hearing, only 20 per cent vision left and I live alone in a three-bedroom house. But even the most socially isolated and dependent people live in fear of further hardship.
“Disability benefits will be increased in line with inflation, but that doesn’t compensate for everything that has come before. People with serious disabilities still face losing their disability living allowance after wrongly being found fit to work. I fail to see the justification of forcing the severely disabled to undergo assessment from doctors who in many cases have little or no knowledge of a specific issue.
“The benefit budget to the unemployed has been cut by $4bn, and inevitably some of that burden will fall on the most vulnerable. There is also the worry of support and care. I receive only three hours of care a week, despite the fact I’m housebound and dependent on a third party to make all my phone calls, my appointments and do my shopping.”