UK Politics

Ministers 'consider alternatives' to 5.2% benefits rise

Banknote and coins Image copyright PA
Image caption Ministers are concerned about the big hike to the benefits bill

Ministers are considering alternatives to an inflation-linked rise to benefits, government sources have said.

Benefits are due to go up by 5.2% from next April, in line with September's inflation figures.

But the government is worried about the cost of such hikes and the impact on public opinion given the current low wage increases.

Deputy Prime Minister Nick Clegg said the government would "not balance the books on the backs of the poor".

He said "difficult decisions" would have to be taken, but he would not "provide a running commentary on decisions and debates which haven't even been held in government yet".

Sources would not say what other options were being considered instead of an inflation-linked rise. It is not thought that any change to the planned 5.2% rise in pensions is being considered.

The BBC News channel's chief political correspondent Norman Smith said one possible option could be raising benefits in line with the average inflation rate for the year, rather than the September figure.

Freezing payments

The Financial Times is reporting that Chancellor George Osborne has asked officials for alternative models, including a rise in line with average earnings growth of about 2.5% or freezing some payments.

It is understood the government will have "resolved" the options by early December when the uprating of benefits is presented to Parliament.

The Institute of Fiscal Studies has calculated that the 5.2% September inflation figure will add £1.8bn to welfare spending next year.

It said freezing all benefits and pensions would save about £10bn and linking benefits increases to wage rises would save £5bn.

A further option of switching from the September inflation figure to an average inflation figure calculated over six months could save about £1.4bn, the IFS added.

'Difficult decisions'

During a visit to RAF crews in Lincoln, Mr Clegg said: "I think we all know that we are having to do something extremely difficult.

"But we have been very, very clear, we're not going to balance the books on the backs of the poor. That will remain our guiding principle as we continue to take these difficult decisions in the weeks, months and years to come."

Liam Byrne, shadow work and pensions secretary, said: "Pensioners up and down the country struggling with rising heating bills and worried about the winter ahead will now be worried sick about rumours that the Tory-led Government is about to bin its commitment to triple lock the increase in pensions.

He called for Work and Pensions Secretary Iain Duncan Smith to "come clean" about whether the triple lock was government policy now and next year, or another broken promise.

The coalition's so-called "triple lock" policy meant that from April 2011 the basic state pension would rise each year in line with average earnings, prices or 2.5%, whichever was the most.

In 2011, the relevant measure of price inflation was the retail prices index but from next year it will be the consumer prices index.

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