Osborne and Clegg fight it out over plan to erode benefits
The Chancellor is considering breaking a pledge to raise benefits in line with inflation
Andrew Grice has been Political Editor of The Independent since 1998. He was previously Political Editor of The Sunday Times, where he worked for 10 years, and he has been a Westminster-based journalist since 1982. His column, Inside Politics, appears in The Independent each Saturday.
Friday 04 November 2011
Nick Clegg is threatening to veto a controversial Treasury plan to freeze pensions and state benefits next April.
George Osborne, the Chancellor, is considering whether to break the Government's pledge to raise benefits in line with inflation in order to save up to £10bn. But the move has provoked a rift with the Liberal Democrats, who are arguing that the most vulnerable people in society should not bear the brunt of efforts to reduce the deficit.
Mr Osborne, who will announce his decision on 29 November, has a dilemma because inflation is rising faster than earnings. The Government's policy is to increase most benefits each April in line with the consumer prices index (CPI) the previous September – 5.2 per cent this year.
It has also pledged to raise the basic state pension by whichever is the higher of three figures – 2.5 per cent, the rise in average earnings (currently 2.5 per cent) or the CPI. The Liberal Democrats have trumpeted this "triple lock" on pensions as a major "win" inside the Coalition because it featured in their election manifesto last year.
Mr Clegg will demand that Mr Osborne's decision be approved by "the quad" – the powerful group which resolves difficult issues that threaten to divide the Coalition parties. Its members are David Cameron, Danny Alexander, the Liberal Democrat Chief Treasury Secretary, Mr Osborne and Mr Clegg.
Liberal Democrat ministers are describing a benefits freeze as a "red line" they would not cross. The Liberal Democrat pressure may force the Chancellor to opt for a less painful squeeze on pensions and other benefits. Treasury officials are also looking at whether they could be raised in line with earnings, which could save about £5bn, or a six rather than 12-month inflation figure, which could reduce the bill by £1.4bn.
Senior Liberal Democrats do not rule out paring back the scheduled 5.2 per cent increase. But they may press for a selective rather than an across-the-board approach which protects the sick and disabled, those recently out of work and pensioners. Insiders expect a compromise to be reached by "the quad".
Mr Osborne could also face opposition from Iain Duncan Smith, the Work and Pensions Secretary, who would have to implement the squeeze and is said to share some of the Liberal Democrats' concerns about hitting the vulnerable at a time when their bills for food, gas and electricity are rising sharply.
The Chancellor wants to maintain the downward pressure on the social security budget.
His allies believe voters would understand the need for restraint on the grounds that the higher-than-expected inflation figure is a one-off. However, opponents will point out that the move could set a dangerous precedent.
Yesterday Downing Street dismissed the idea that benefits might not be fully indexed as "rumour and speculation".
- 1 Thailand deaths: Pair's bloodied bodies found naked on Koh Tao beach
- 2 Scottish independence: Ireland since 1919 is a lesson for Scotland in what a Yes vote means
- 4 John Travolta addresses former pilot's gay romance allegations publicly for the first time
Thailand deaths: Pair's bloodied bodies found naked on Koh Tao beach
Scottish independence: Police will be on high alert on Friday whatever the result
John Travolta addresses former pilot's gay romance allegations publicly for the first time
QS university world rankings: Imperial College London leapfrogs Oxford to join Cambridge as best British university
Scottish independence exclusive: Millions of banknotes sent to Scotland in case Yes vote sparks run on ATMs
Daniele Watts: Django Unchained actress detained by Los Angeles police after being mistaken for a prostitute
The political class is doing what Hitler couldn’t – destroying Britain
Scottish independence: Nationalist leader Jim Sillars threatens pro-union companies with 'day of reckoning' after independence
Scottish independence: Yes campaign feels the heat as Alex Salmond's NHS claims come under furious attack
Portuguese academic says British are 'filthy, violent and drunk'
£23m Birmingham cycle scheme is attacked by Tory councillor for not catering to the elderly
£35000 - £50000 per annum + benefits: Ashdown Group: Senior QA Engineer (Agil...
£26000 - £28000 per annum: Ashdown Group: Digital Marketing Executive (SEO, PP...
£40000 - £50000 Per Annum: Clearwater People Solutions Ltd: Our retail client ...
£400 - £450 Per Annum possibly more for the right candidate: Clearwater People...