Labour refuses to back 1% cap on benefits rises but minister insists the era of the 'generous' welfare state is over
Pensions minister Steve Webb warns the state of the nation's finances means 'difficult decisions' had to be made
George Osborne used the Autumn Statement to say rises in working age benefits will be capped at 1 per cent from April 2013
Chancellor said the cap would be enshrined in law – forcing Labour to decide whether to oppose limits which polls indicate will be welcomed by the public
Matt Chorley and Tim Shipman
00:11 GMT, 6 December 2012
00:00 GMT, 7 December 2012
Lib Dem pensions minister Steve Webb said the state of the public finances meant benefits could not be as 'generous' as they were in the past
Labour is refusing to back the unprecedented cuts to welfare benefits outlined by George Osborne in his Autumn Statement.
Ministers have insisted that Britain can no longer afford the ‘generous’ handouts of the past, but in its verdict on the statement, the Institute for Fiscal Studies (IFS) said that its effect will be to take from the poor and give to the middle.
Shadow Chancellor Ed Balls and Labour Work and Pensions spokesman Liam Byrne yesterday signalled that Labour will oppose the decision to save 14billion by pegging annual benefits increases to 1 per cent for the next three years.
With inflation expected to be 2.2 per cent next year, it means a real-terms cut.
Mr Balls suggested the move by the Chancellor on Wednesday would penalise many low-paid people in work who receive tax credits, and would also increase child poverty.
Lib Dem minister Steve Webb challenged Labour to back the cap, warning the state of the public finances meant it is 'simply not been possible to fully protect every benefit'
The Government is to introduce a Bill to
enshrine the one per cent cap in law – forcing the Opposition into a corner over
whether to oppose limits in welfare which polls show are popular with
Under cuts outlined by George Osborne yesterday, working
age benefits will not rise in line with inflation – due to be 2.2 per
cent next year – but will be capped at one per cent for each of the next
The Chancellor told MPs the changes
were needed because 'fairness is about being fair to the person who
leaves home every morning to go out to work and sees their neighbour
still asleep, living a life on benefits'.
He said Jobseekers Allowance, Employment and Support Allowance, Income Support and Housing Benefit would be affected.
But the changes also affect maternity pay – with Labour dubbing the plans a 'Mummy Tax'.
SYMPATHY CARD: BALLS BLAMES DEFICIT MUDDLE ON STAMMER
Ed Balls today blamed his stammer for getting in a muddle in the Commons yesterday about whether or not the deficit was rising.
The shadow chancellor was jeered by Tory MPs when he declared: ‘The national deficit is not rising…er… is rising, not falling.’
Critics said he was thrown off course by figures showing the deficit was forecast to fall.
In early morning TV interviews Mr Balls blamed the noise, telling ITV’s Daybreak: ‘It is pretty loud in there.’
Then on BBC Radio 4’s Today programme he suggested the surprise sale of 4g superfast mobile phone spectrum had thrown him.
he added: ‘Everybody knows with me that I have a stammer and sometimes
my stammer gets the better of me in the first minute or two when I
speak, especially when I’ve got the Prime Minister, the Chancellor and
300 Conservative MPs yelling at me at the top of their voices.
‘But frankly, that’s just who I am and I don’t mind that.’
complaint about noise has surprised many in Westminster, where Mr Balls
has a reputation for relentless heckling from the Labour frontbench.
barracking during Prime Minister’s Questions has prompted David Cameron
to brand him a ‘muttering idiot’ and ‘the most annoying person in
George Osborne insisted it was Mr Balls's history as a close ally of
Gordon Brown, rather than his stammer, was behind his treatment by MPs.
would say the reason why the House of Commons doesn't take Ed Balls
very seriously has got nothing to do with the fact that he has got a
stammer,” he said.
‘It is the fact that he was the chief economic adviser when it all went wrong, and he never acknowledges that.'
In a statement in the Commons today,
Mr Webb said the government was 'faced by a tough decision' and Work and
Pensions Secretary Iain Duncan Smith had 'decided the national economic
situation is such the country simply cannot afford to be as generous as
we have in the past'.
'There had been speculation about
benefit freezes, however Government has found sufficient money to be
able to pay a one per cent increase for those people of working age on
the main rate of Jobseekers' Allowance or income support, as well as for
those on the main rate plus work-related activity component of
employment and support allowance and housing benefit.'
fiscal situation means it is simply not been possible to fully protect
every benefit and we need to ensure we have a welfare system Britain can
He claimed there was a lot of 'sound and fury' from Labour fronbenchers but 'when it comes to the crunch' they would not back the move.
Mr Webb announced the basic state pension would rise to 110.15 for a
single person, up 2.70 on last year. The state pension will be equivalent to 18 per cent of average
earnings, the highest share of average earnings in the last 20 years.
Additional state pensions and disability benefits will rise by full value of the consumer
prices index rate of inflation – 2.2 per cent.
The Treasury produced figures showing
that those on out-of-work benefits have seen their incomes rise by 20
per cent since 2007, double the rate of workers on average earnings.
The moves announced yesterday
represent a saving to taxpayers of 3.6billion by the General Election
due in 2015 and 4.5billion by 2017.
The disabled, carers and pensioners
will be exempted from the changes. Disability Living Allowance and the
disability elements of tax credits will still rise in line with
But the squeeze will hit those on
Jobseeker’s Allowance, Income Support and Employment Support Allowance,
the new name for incapacity benefit whose claimants are now undergoing
regular medical checks to see if they can work.
Labour's shadow chancellor Ed Balls refused to say whether he would back the cap.
will look at the details over the next week, because we have not even
seen the legislation yet,' he told BBC Radio 4's Today programme.
test for me will be, is this hitting working families on low incomes,
does it lead to rising child poverty, is it fair for him to take
billions of pounds from low and middle-income families when he is
spending 3 billion next April on a tax cut for (earnings) over
Labour produced figures showing that
3.7million people claiming child tax credits would be hit, along with
2.5million who get working tax credit, 479,000 who claim the local
housing allowance portion of Housing Benefit, and 232,000 expectant
mothers who get statutory maternity pay.
The party also
released figures audited by the House of Commons Library calculating
that a single earner couple on 20,000 a year with two children would
see their earnings cut by 279.
Scroll down for video
Statement: George Osborne said the move would return 'fairness' to the benefits system
Opposition: Shadow Chancellor Ed Balls released figures indicating that a single earner couple with two children earning 20,000 per year would lose out on 279
the Commons shadow work and pensions secretary Liam Byrne branded the
changes a 'strivers' tax', arguing that the bulk of the cuts would
affect working households.
real-terms cut will save the Treasury 6.7 billion but Mr Byrne said
the impartial House of Commons library had assessed that just 23% would
come from jobseekers' allowance, employment support allowance and income
'The entirety of
the balance is from tax credits, maternity allowance, maternity pay,
sick pay, housing benefits – all of which of course are claimed by
'These are the strivers and battlers the Prime Minister promised to defend at his party conference and they are the people paying the price for this Government's failure.'
But Treasury officials said that
workers would benefit from a rise in the income tax personal allowance
and stressed that Universal Benefit will kick in next year, which will
also make work pay.
VIDEO: Ed Balls defends his stumble on the BBC Radio 4 TODAY programme
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Better off on benefits How each April the rise in state handouts has risen by more than the average annual increase in wages
Not so sweet: Unison members wore George Osborne masks to protest over cuts as the Chancellor delivered the Autumn Statement
The Chancellor told MPs: ‘Over the
last five years those on out-of-work benefits have seen their incomes
rise twice as fast as those in work.
That’s not fair to working people
who pay the taxes that fund them.
‘Those working in the public services,
who have seen their basic pay frozen, will now see it rise by an
average of 1 per cent.
'A similar approach of a 1 per cent rise should
apply to those in receipt of benefits.
'That’s fair and it will ensure
that we have a welfare system that Britain can afford.’
Senior Lib Dems backed the change,
pointing out that the 1 per cent cap in benefits rises matches the 1 per
cent pay rises planned for public sector workers and a 1 per cent
increase in the higher rate income tax threshold announced yesterday.
CASE STUDY: 'JOBSEEKER'S ALLOWANCE IS VITAL TO MY HUNT FOR WORK'
Job search: Languages graduate Thomas McLenachan
Languages graduate Thomas McLenachan says the 71 a week he claims in Jobseeker’s Allowance makes all the difference while he looks for work.
The 26-year-old has been hunting for jobs since leaving University College London in the summer with a masters degree in Eastern European Studies.
He is living with his parents in Manchester and has sent off dozens of applications, but so far has had no luck.
Under yesterday’s changes, graduates like him will receive less in Jobseeker’s Allowance because the 1 per cent rise is less than inflation. He said: ‘A lot of graduates are finding it hard to find work here and many are looking abroad.
‘These days it’s really tough to get a job within a few weeks of leaving university, especially if you’ve been tied up with exams at the end of your course. It can take a long time.’
Mr McLenachan got a 2.1 from Nottingham University in English and Russian before his masters, which was funded by a scholarship.
He is keen to begin working so that he can make a dent in his 18,000 student loan debt and dreams of working for the civil service. He beat 60 applicants to get down to the last four in one job application, but did not make the final cut.
Recently, he went on a course for teaching English as a foreign language. He added: ‘I basically use the money I get from Jobseekers’ to pay for travel to interviews. I’m hoping to find something here but my back-up plan is to go abroad and teach English.
‘It’s sad that the benefit is being cut in real terms. The vast majority of us are honest and hard-working.’
And families face child benefit rise of just 20p a week
By Becky Barrow
Parents will get a rise of only 1 per cent in their child benefit when the three-year freeze ends in 2014, it emerged yesterday.
For families with one child, this is the equivalent of an extra 20p a week – which would cover the average price of just one nappy for a toddler.
Since April 2011, child benefit has been stuck at a rate of 20.30 per week for the first child and 13.40 per week for each subsequent child.
'Paltry': Critics said George Osborne's decision to reward parents with just a 1 per cent rise in child benefits at the end of the three-year freeze would hurt struggling families
Yesterday the Chancellor said the long freeze will end in two years’ time, but he will reward families with a rise of only 1 per cent for the following two years.
For the second child, the rise is equal to just 13p a week.
George Osborne’s decision was criticised by experts who said the paltry increase will hurt families at a time when millions are struggling to make ends meet.
Child benefit, typically paid to the
mother, is relied upon by families to balance their stretched budget,
from helping to pay for their weekly food shop to buying a child’s new
Coalition came to power in May 2010, it used to increased generously
each year, with the rise linked to the retail prices index measure of
three-year freeze followed by two years of tiny rises has wiped out the
spending power of child benefit, leaving a black hole in the family
budget. Some elements of the complicated child tax credit payments will
also rise by only 1 per cent for three years from April 2013.
A spokesman for the StepChange Debt
Charity said: ‘Family budgets have been put under extreme strain in
recent years. Stagnant wages and rising living costs are pushing more
families towards financial breaking point.
‘The changes to child benefit will hit many families at a point when they are already struggling to make ends meet.’
Autumn Statement: Debt charities argued the Treasury's plans would put struggling families under further strain
Child benefit, which used to be paid to every family with young children in Britain, has already become embroiled in controversy.
From January 7, families with at least one parent earning more than 50,000 will lose some of the benefit. It is being axed completely for those with at least one earner on more than 60,000.
Around 1.2million families will be affected by the move, but yesterday’s announcement by the Chancellor means those families who still get child benefit are now under attack as well.
Brendan Barber, general secretary of the Trades Union Congress, said: ‘This Chancellor has presided over one of the biggest ever squeezes on the budgets of working families.
‘Small gains on fuel and the personal allowance are dwarfed by the swingeing cuts to child benefit and tax credits that many millions of families rely on to get by. For all the Westminster talk of fiscal rules and structural deficits, it is money at home that matters to families, and that’s where they’ve been hit harder than anyone else.’
Robin Williamson, technical director of the Low Incomes Tax Reform Group, described the rise as ‘not generous’.
GEORGE OSBORNE ACCUSED OF 'MUMMY TAX' ON MATERNITY PAY
By Deputy Political Editor
George Osborne was accused of bringing in a ‘mummy tax’ last night after it emerged that he will impose a real terms cut on statutory maternity pay.
Both maternity and paternity pay will be subject to a below inflation rise for three years from next April.
Some of the 232,000 women who claim maternity pay every year will be hit, along with 59,000 who claim Maternity Allowance instead.
Details of the effective cut were sneaked out in the small print of the Autumn Statement. Mr Osborne announced the 1 per cent rise as part of measures to reduce the welfare bill, but expectant mothers were last night digesting the news that they will also be hit.
Statutory Maternity Pay is paid by employers when women take time off to have a baby. It is paid for 39 weeks, with the first six weeks at 90 per cent of usual salary and then 33 weeks at 135.45 a week. From April, the amount will increase by just 1.35 a week rather than the index-linked rate of around 3.
The same rate is paid under Maternity Allowance, which is awarded to those who do not qualify for statutory maternity pay – often nannies and those who are pregnant when they take a new job.
Expectant mothers can claim the allowance as soon as they have been pregnant for 26 weeks.
Labour Treasury spokesman Catherine McKinnell said: ‘In the Budget the small print was the granny tax and in the Autumn Statement the hidden detail was George Osborne’s mummy tax.
‘They are hitting millions of working families and mums taking a break from their job to look after their newborn baby. And all on the same day that millionaires get an average tax cut of over 100,000.’