'Lost the plot': Backlash amid reports Liz Truss set to 'reduce benefits' for millions

Liz Truss is facing further backlash to the government's so-far calamitous mini-Budget amid claims she is planning to pay for billions of tax cuts by curbing real-term benefits.

According to reports, the prime minister and chancellor Kwasi Kwarteng are planning to increase benefits in line with earnings, rather than inflation, in a move that could raise up to £5bn for the Treasury.

The move would mean an effective cut in benefits in real terms, further impacting some of the more vulnerable in the country.

On Friday a Conservative minister refused to confirm the speculation over the government's plans around benefits, dodging the question during an interview on BBC Breakfast.

Speculation over real-term benefit cuts comes after Kwarteng unveiled sweeping economic reforms last Friday, which promptly caused chaos in the financial system and prompted calls for a u-turn.

Plans to save on the welfare budget in order to help fund the £45bn package of tax cuts have been met with disdain by critics, with the head of think tank The Resolution Foundation saying the government would have "lost the plot" if it pushes through with the policy.

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The foundation, which works to improve the lives of people on low to middle incomes, calculated that the move - which reverses a pledge made by former Chancellor Rishi Sunak - could cost some families over £1,000 in a two-year period.

The think tank's chief executive Torsten Bell said: "If we seriously end up cutting benefits to fund tax cuts for the top in the most unequal large country in Europe then we've lost the plot."

Both The i and The Times reported that the government is drawing up the plans for real-terms benefits cuts by only raising them in line with earnings rather than inflation.

The i reported that government sources said no final decision had been made and ministers would wait to look at inflation figures for September, which are due to be published in October.

Former chancellor Sunak had previously pledged to increase benefits in line with inflation after a 3.1 per cent increase in April fell short of inflation levels at the time.

The reports indicate that while Truss had committed to maintaining the pension triple lock, the issue of benefits was being kept under review.

In interviews on Thursday after nearly a week of silence following the mini-budget, the Prime Minister insisted that the government's priority was frontline public services.

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But critics have slammed plans to fund what are being seen as tax cuts for the rich with a further squeeze on the less well off.

Labour’s Shadow Work and Pensions Secretary Jonathan Ashworth called for parliament to be recalled and the budget reversed, telling The i it was the: "most divisive, unfair and disastrous budget in living memory".

Dan Paskins, director of UK Impact at Save the Children, said it was "horrifying" that the government hadn't been clear on whether it would uprate benefits in line with inflation.

"Uprating is a cost-of-living Government commitment," he said. "It is a fair increase in income for the very poorest households, many of whom are in work and it would also help families keep pace with soaring everyday costs.

“We estimate that a couple with two kids, without any uprating at all, would lose out on over a £1,000 per year. In these economic circumstances, no-one can afford that. Surely the government isn’t planning on leaving families in this situation?”

Quizzed on speculation over real-term cuts to benefits on BBC Breakfast, Financial Secretary to the Treasury Andrew Griffiths said: "We're not going to do .. .the normal uprating round of benefits including pensions at 7.43 on BBC - that's something that secretaries of state will be working on over the coming weeks.

"But the government has committed to honour and fulfil the current comprehensive spending review so that includes the overall package of money for public services, for benefits."

Asked: "Are you keeping your promise, or are you changing?", he replied: "The promise I make is that we will go through the normal process for uprating benefits and allowing secretaries of state to decide and bring forward their own plans.

"That's not a yes or a no, it's simply adhering to the process and not commenting on speculation."

Writing in the Daily Express, a former Conservative pensions minister said it would be "a travesty" if the Government increased the pensions of the UK’s poorest citizens by less than the consumer price index.

Baroness Altmann wrote: “The pension credit has always been legally required to rise at least in line with earnings inflation, but the Government can choose to do better.

"I believe it must do so. If these poorest older citizens only see their pensions increase by the lower earnings figure, it would be a travesty."