Liz Truss is battling a party rebellion over her proposed plans to impose a real-terms cut to benefits by increasing them in line with earnings instead of inflation.
The PM has been criticised by anti-poverty campaigners, opposition MPs and her own backbenchers after she refused to commit to keeping former chancellor Rishi Sunak’s promise to uprate benefits in line with the soaring cost of living, affecting the income of millions of people.
The benefit cut debate explained in 10 points
Are benefits being cut? The prime minister is expected to unveil plans to increase working-age benefits in line with earnings instead of in line with inflation. This would mean an increase of around 5%, instead of a 10% inflation-linked rise, amounting to a real-terms decrease.
Why is this being considered? The prime minister and chancellor Kwasi Kwarteng are scrambling to find ways to keep the public finances under control after announcing £45bn in unfunded tax cuts in their mini budget, sending markets into turmoil and causing sterling to tumble to record lows against the dollar.
How many people would be affected? The uprating process decides the level for certain benefits claimed by millions of people, including universal credit, jobseeker’s allowance, and employment and support allowance. Other benefits such as disability benefits are legally bound to rise in line with inflation.
How much would people lose? The decision would result in a significant loss of income for people who rely on benefits. In 2023/24 a single unemployed adult would lose £185, a disabled adult would lose £380, and a working couple with two children would lose £752.
Anti-poverty campaigners have called the real-terms cuts ‘morally indefensible’. They argue soaring prices driven by spiralling inflation coupled with energy bills at twice the level of last winter means many low-income families are already at breaking point.
Truss’s allies argue this approach is only fair at a time when workers are seeing their wages increase by around 5% a year, and a benefits cuts would encourage people into work. Home secretary Suella Braverman backed the real-terms cut, saying the UK has a ‘Benefits Street’ culture.
Experts have dismissed this as ‘nonsense’, pointing out that the proportion of UC claimants who are out of work is low. Some 41% of universal credit claimants are employed. A further 30% are unable to work due to illness, disability or caring responsibilities.
What’s more, unemployment in the UK is low already. As Torsten Bell, chief executive of the Resolution Foundation think tank, put it: “We’ve got amongst the highest employment rates on record and the recent fall is amongst older workers who aren’t claiming benefits.”
What does the public think? Polling on the issue by YouGov found that 61% of voters think benefits should go up in line with inflation, including half (49%) of people who voted Conservative in 2019.
What about pensions? Truss has committed to maintaining the pensions triple lock, meaning that payments will increase by whichever is highest of inflation, average earnings or 2.5%. In practice this means pensions will increase in line with inflation, which is currently 9.9%.