Liz Truss has been warned by Cabinet that her plan to cut benefits “will never happen” after Jacob Rees-Mogg became the latest top minister to revolt.
The Business Secretary joined fellow members of the Prime Minister’s top team in voicing disquiet at her and the Chancellor’s bid to rein in welfare spending.
It is understood he argued that uprating handouts to reflect rising prices is the only political reality amid a cost of living crisis.
Downing Street is exploring whether to increase Universal Credit by the same amount as average wage growth rather than by inflation as is usual.
Such a move would see welfare payments rise by around six per cent, meaning claimants would see a real terms cut of four per cent to their budgets.
In her speech to conference on Wednesday morning the Prime Minister hinted she is ready to press ahead with the decision even if it is unpopular.
“I want to live in a country where hard work is rewarded,” she told the party faithful in Birmingham as she pledged an “iron grip on the nation’s finances”.
She said: “I believe in getting value for the taxpayer. I believe in sound money and the lean state. I know this feeling is replicated across the country.
“And that’s why we must always be careful with taxpayer’s money. It is why this Government will always be fiscally responsible.”
The Resolution Foundation think tank has calculated that hiking benefits only in line with average wage rises would save £9 billion over the next two years.
But there is a growing Cabinet revolt over the idea, with some members of the Prime Minister’s top team publicly breaking ranks.
The Telegraph understands that one Cabinet minister has privately told Ms Truss the cut “will never happen” given the widespread opposition within the Tory party.
Penny Mordaunt, the Leader of the Commons, said on Tuesday that she had “always supported” inflation matching rises.
“It makes sense to do so, that’s what I voted for before. We want to make sure that people are looked after, and that people can pay their bills.
“We are not about trying to help people with one hand and take away with the other,” she told Times Radio.
Chloe Smith, the Work and Pensions Secretary, is understood to have also argued in favour of an inflation matching rise from next April.
When asked what he thought Robert Buckland, the Welsh Secretary, replied that “the safety net is an important part of what a one nation Conservative is all about”.
“Every Conservative government that I’ve been part of has retained this safety net, and I’m sure this one will do the same,” he said.
Brandon Lewis, the Justice Secretary, also hinted that he privately wants to see handouts go up in line with the rising cost of living.
He told Sky News that people shouldn’t be “too concerned” as the Government has a “track record of doing everything we can to protect the most vulnerable”.
Universal Credit payments are reviewed every Autumn by the Work and Pensions Secretary and are usually increased in line with September’s inflation figure.
The uplift then comes into force the following April. As a result, this year the system saw benefits claimants experience a big real-terms cut in earnings.
Handouts were put up by 3.1 per cent, but inflation then took off over the winter and prices were rising by seven per cent when the rise came into effect.
Ms Truss has committed to reinstating the Triple Lock for pensions this year, meaning payments to pensioners will go up by an expected 10 per cent.