The Government is preparing for a major U-turn over £4.4bn cuts to disability benefits, as Conservative backbenchers threatened to rebel against plans that would leave nearly 400,000 disabled people thousands of pounds worse off.
While Downing Street insisted that ministers remained “committed” to the reforms, which will cut support for people deemed to require aids and equipment to help them get dressed or go to the toilet, Treasury sources said it was likely the Government would go into “complete reverse”.
The cuts to Personal Independence Payments (PIP), which were announced last week and included in George Osborne’s Budget statement, have provoked a growing backbench revolt which could see them defeated in the House of Commons.
Senior Conservative MP Sarah Wollaston, chair of the House of Commons Health Committee, told The Independent that voters would be “rightly uncomfortable” with a Budget measure that removed support for disabled people at a time when higher earners have been given a tax break.
“There is a nuanced argument to be had about PIP, but I do think the Government will have to think again about why they are doing this,” she said.
“If you can’t bring the disability charities with you need to think again about proceeding.”
The independent Institute for Fiscal Studies (IFS) has said that the cuts to PIP, which will free up £4.4bn over four years for the Treasury, will leave 370,000 people on average £3,500 a year worse off.
George Osborne 2016 budget at a glance
George Osborne 2016 budget at a glance
1/8 Debt forecasts up, growth forecasts down
The OBR’s new forecasts have downgraded growth in all of the next five years to 2020. The watchdog says the economy will only grow by 2 per cent in 2016, as opposed to the anticipated 2.4 per cent. Borrowing and productivity growth are also down – with forecast borrowing in 2018-198 £16 billion higher
2/8 New tax on sugary drinks
The Chancellor announced a new tax on sugary soft drinks, which is projected to raise £520 million. At least some of the money will be spent on doubling funding for school sport, the Chancellor says. Labour leader Jeremy Corbyn welcomed the levy
3/8 Tax cut for higher earners paying the 40p rate
The Chancellor has raised the threshold for paying the higher rate of income tax to £45,000. The higher rate is paid by roughly the richest 15 per cent, currently people earning over £42,386
4/8 Increase in tax-free income tax threshold
The tax-free allowance increase to £11,500 in April 2017 – up from £10,600 now. The Chancellor previously raised the allowance from £6,475 in coalition with the Liberal Democrats. The Conservative manifesto pledges to put the allowance up to £12,500 by the end of the Parliament
5/8 New devolution for counties and powers for London and Manchester
The West of England, the East of England and Greater Lincolnshire will all get elected mayor-led combined authorities with new powers. The Chancellor says they are backed by £1 billion new funding. Greater Manchester will get new powers of criminal justice while London will keep its business rates – giving whoever is elected Mayor a lot more spending power
6/8 Fuel duty frozen for sixth year running
The Chancellor had planned to end the fuel duty freeze he had put in place for the whole previous parliament. In the event, he has announced a freeze for another year
7/8 All schools to become academies
As reported yesterday the Chancellor unveiled legislation to turn all schools into academies. He said all schools would either be academies or on their way to being academies by 2020, and that funding had been set aside to fund the change
8/8 Lifetime ISA
The Chancellor announced a new savings account to encourage under-40s to save for retirement – for every £4 saved, the Government will top this up by £1 up to the value of £4,000 a year. Tax-free ISAs will also be increased from £15,000 to £20,000
Disability charities, while advocating reform of PIP to ensure interventions are targeted more appropriately, have opposed the cut.
The Government insists that the overall PIP budget will continue to rise in real terms, but analysis by the IFS indicates that, under current plans, this will not be the case.
Downing Street said that it would be several months before the “proposals” on PIP were brought before Parliament, after the Education Secretary Nicky Morgan described the cuts as merely a “suggestion” on Thursday night.
“The government’s position hasn’t changed,” the spokesperson said. “We remain committed to making these much needed reforms. We have got the time now with the proposals out there, before we bring forward legislative proposals, to explain it to colleagues across the House and to engage with disability groups.”
“This is about making sure that we can get PIP back to what it was originally intended to do, which was to target the most vulnerable and the most in need.”
But a Treasury source told the Independent that the risk of political damage to the Government, following the announcement of plans to raise the threshold at which people pay the higher band of tax from £43,000 to £45,000, would likely prove too great for the Government to proceed.
“The change is so complicated that the overall narrative is that this is Tories hitting disabled people to lower taxes for the middle classes,” the source said.
Any reversal of the cuts would require a recalculation of the Chancellor’s budget proposals. Conservative MP Andrew Percy has proposed the Government consider adding “a penny or two” to fuel duty, rather than proceed with the PIP cuts.
Although a Department for Work and Pensions consultation on the reforms has closed, Work and Pensions Secretary Iain Duncan Smith this week wrote to MPs insisting that the Government was “continuing to talk to disability groups and colleagues about the best way to do this before bringing forward legislation”.
The number of people who qualify for PIP support had tripled in 18 months, he added.
Labour’s Shadow Work and Pensions Secretary Owen Smith said the Government should “come clean on its intentions” and allow a full vote in the House of Commons on the reforms.