Jeremy Hunt swerved a row with Tory backbenchers today as he announced that benefits and pensions will rise with inflation.
The chancellor promised to increase welfare after vowing to “protect the vulnerable” and to be “compassionate”.
UK inflation hit a 41-year high in October at 11.1 per cent amid rising soaring and food prices.
There were concerns that the triple lock on pensions - a Tory manifesto pledge - could be scrapped as Hunt sought to plug the country’s black hole in his autumn statement.
Ditching the lock, which increases the state pension in line with inflation, wages of 2.5 per cent depending on what is highest, would have sparked a fierce backlash from Tory MPs.
He also would have faced a significant revolt from Tories had he squeezed benefits after members of Rishi Sunak’s cabinet - including Michael Gove and Mel Stride - spoke out against it when they were on the backbenches.
But the chancellor did not break the party’s promises, confirming that both pensions and benefits will rise with inflation.
Working age benefits will rise by the rate of inflation at 10.1% and the household benefit cap to be increased from April 2023.
This will support families during these challenging economic times. #AutumnStatementpic.twitter.com/uFYCCpxeue
— HM Treasury (@hmtreasury) November 17, 2022
It does, however, mean deeper cuts in public spending elsewhere and bigger tax rises.
Hunt told the Commons: “There have also been some representations to keep the uplift to working age and disability benefits below the level of inflation given the financial constraints we face.
“But that would not be consistent with our commitment to protect the most vulnerable so today I also commit to uprate such benefits by inflation with an increase of 10.1 per cent. That is an expensive commitment costing £11billion.”
"We will fulfil our pledge to the country to protect the pensions triple lock" says Chancellor Jeremy Hunt MP - adding the state pension will "increase in-line with inflation" in April.https://t.co/WUnquWwffN
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— Sky News (@SkyNews) November 17, 2022
On pensions, he added: “The cost of living crisis is harming all pensioners so because we have taken difficult decisions elsewhere in this statement, I can today announce that we will fulfil our pledge to the country to protect the pensions triple lock.
“So, in April, the state pension will increase in line with inflation, an £870 increase which represents the biggest ever cash increase in the state pension.
“To the millions of pensioners who will benefit from this measure I say – now and always, this government is on your side.”
Hunt also set out plans to for stealth taxes as well as a squeeze on public spending to help balance the nation’s books.
The chancellor was seeking to repair the damage wrought by Liz Truss and Kwasi Kwarteng’s disastrous mini-budget in September.
Under Hunt’s plan, high earners will have to pay more tax to help fill the £55 billion hole in the government’s finances.
The chancellor said he was “asking those with more to contribute more” as he tries to repair the damage done Covid-19, war in Ukraine and Kwarteng’s mini-budget.
He announced that he was reducing the salary threshold at which workers begin paying the 45p top rate of income tax from £150,000 to £125,140.
It means thousands more will start paying the so-called “additional rate”, raising billions of pounds of extra revenue for the Treasury.
But confirming that all workers will pay more tax, he also froze the salary thresholds for the other income tax rates.
That means more workers will be dragged into paying the 20p and 40p rates as their pay increases.
On public spending, Hunt said it would still go up - but by less than previously thought, while departments will have to find billions of pounds worth of savings.
“We have to take difficult decisions on the public finances,” he said. “So we are going to grow public spending – but we’re going to grow it slower than the economy.”
Meanwhile, Hunt also confirmed that he was extending and increasing the windfall tax on the excess profits of energy firms.
He also announced that the tax rate will increase from 25 per cent to 35 per cent and run for two more years until 2028.