Home Business Liz Truss has faced a new riot over benefits

Liz Truss has faced a new riot over benefits

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Liz Truss is bracing for a new rebellion over her economic plans, with senior Tory MPs threatening to vote against the UK Prime Minister if she decides to cut benefits in real terms next spring.

Rafter farm is considering raising benefits in line with rising average wages rather than inflation, a controversial move that has raised concerns about the impact of the crisis on the cost of living.

Average earnings, including bonuses, rose 5.5 per cent between May and July, according to the latest figures from the Office for National Statistics, while inflation is almost twice as high at around 10 per cent.

The move is part of the government’s bid to cut public spending to calm financial markets after sterling and gold prices fell following last month’s “mini” budget, which included £45bn of tax cuts.

But the Trust, which has already been forced to make one U-turn this week – abandoning its controversial scrapping of the top rate of income tax of 45p – is now under pressure from some MPs to reverse course on its benefits plan.

Penny Mordant, the leader of the House of Commons, became the first cabinet minister to speak out against the policy in an interview on Tuesday morning. Mordaunt said it “makes sense” to increase payouts in line with inflation.

“I’ve always been in favor of whether it’s pensions or the welfare system to keep up with inflation. It makes sense to do so. That’s what I voted for before,” Mordaunt told Times Radio.

“We want to make sure that people are taken care of and that people can pay their bills. We are not about helping people with one hand and taking away with the other.”

When asked about the benefits challenge, Truss said in a pre-recorded interview on Radio 4 on Tuesday morning that the government would need to make decisions to reduce the debt-to-GDP ratio. “I’m very committed to supporting the most vulnerable,” she said, noting the government is paying £1,200 to millions of low-income families to help with rising fuel bills.

“But we have to look at these issues from all angles, we have to be fiscally responsible, and I’m fully committed to that,” she said.

Downing Street believes it would be unfair to increase benefits by 10 per cent when wages in the public and private sectors are growing much more slowly.

However, the Trust is committed to maintaining the pension ‘triple lock’, which will see pensioners see benefits rise based on the higher of inflation, average earnings growth or 2.5 per cent. “When people have a fixed income, like a pension, it’s quite difficult to adjust. I think it’s a different situation for people who can work,” she told LBC.

Damian Green, the former deputy prime minister, said he and other MPs would not vote for the benefits policy in the House of Commons.

“No, I wouldn’t approve of that. And no, I don’t think it will go through parliament,” he told LBC.

“And I think what we’ve learned in the last 24 hours is that the government has gone into listening mode and understands that you can’t just push whatever you want. And I hope that this lesson will be well learned for the future.”

In England, Scotland and Wales, 5.7 million people receive Universal Credit – the basic payment. The Institute for Fiscal Studies, a think tank, has estimated that it will cost £7bn next year to link UC to inflation rather than earnings

Mel Stride, the chairman of the Treasury Select Committee, told the BBC he did not know if he could vote for a real cut in benefits. “I would have to see all the details, I would have to see it in the round, but I would have to think long and hard about it,” he said.

The most recent increase in benefits was only 3.1 percent in April because inflation was low last September, Stride noted.

“So we’re already actually moving away from kind of a pretty strong squeeze in real terms on those benefits, so I think that’s going to be very difficult to do,” he said.

Truss said she was right to scrap the 45p tax rate because it was a “distraction” given it was only a small part of a package that also included tens of billions of pounds in spending to help people with their electricity bills.

UK markets were steady after Monday’s government reversal. The pound rose 0.6 percent to a two-week high against the dollar on Tuesday, hitting $1.14. The yield on 10-year government debt, which rises as prices fall, fell 0.09 percentage point to 3.86 percent as traders awaited more details on how the government will finance its fiscal plans.

Additional reporting by Delphine Strauss and Ian Johnston

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