The Financial Times this weekend reported what it labelled ‘one of the fiercest and most fascinating political battles of the year’ — a battle which looks set to pitch David Laws and Nick Clegg against George Osborne and the Labour leadership.
The issue concerns the amount by which the Coalition should increase benefits: based on September’s inflation figure, this should be 5.2%. The Tories are pushing for a below-inflation settlement, but Mr Laws — co-editor of The Orange Book, and firmly identified as an economic liberal — is urging the Lib Dems to reject such a move:
Mr Laws, considered a fiscal hawk, argues in a letter to Mr Clegg that people on benefits were already under severe pressure from inflation and points out that benefits – including child benefit, council tax and housing benefit – have already been squeezed. “None of us would want to see a significant rise in poverty as we try to secure both economic and social recovery in the UK,” Mr Laws says. He adds that Britain already pays some of the lowest rates of unemployment benefit in the developed world.
Mr Clegg is understood to be sympathetic to the argument of his close friend. Liberal Democrat insiders say the deputy prime minister would oppose “arbitrary and vindictive” measures that moved away from the traditional inflation-linked benefit uprating. The issue is shaping up to be one of the fiercest and most fascinating political battles of the year, as Mr Osborne decides whether to implement in full the 5.2 per cent increase when he makes his autumn statement on November 29.
What of the Labour party’s stance? Labour — the party which in government offered pensioners a paltry 75p increase compared to the Coalition’s generous ‘triple lock’, and tried to abolish the 10p tax rate which the Lib Dems have extended to help more of the poorest — is strangely silent on the matter:
Intriguingly Mr Osborne’s political instincts seem to be in tune with those of the Labour leadership, which is also trying to reclaim the support of key voters in the C2 social class. Labour has refused to attack possible below-inflation rises to out-of-work benefits next April.
The argument looks set to create an odd coalition-within-the-Coalition: Mr Laws’ concerns are said to be shared by work and pensions secretary Iain Duncan Smith who, the FT adds, ‘also opposes arbitrary changes to the way benefits are uprated and strongly contests the populist idea that most benefit claimants are in some way “scroungers”.’
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7 Comments
The cuts — or rather a rise less than inflation — are probably because of plans to move to universal credit which will initially cost the treasury more because it will be more generous to those people starting work and coming off benefits. Putting this into context makes a less than inflationary rise less arbitrary, and certainly not vindictive.
@Charles:
Putting this into context makes a less than inflationary rise less arbitrary, and certainly not vindictive.
—
Tell that to those of us sick and disabled people who have to choose between food and heating this winter. Making a conscious decision to not raise benefits in line with inflation, while we consider giving an additional £40 billion (which is about double the amount of cuts the coalition is making to welfare) to the IMF certainly seems vindictive, cruel & petty to me.
I don’t agree Charles.
Yes we’re going to be paying workers a bit more but that doesn’t help those who are struggling to find work in this harsh economic climate.
People struggling in these times need to be protected.
In other news, “Orange Book Tories” standing up for the poor and vulnerable while Labour stay quiet? Another busting of that weak media stereotype…
This is nothing to do with universal credit, which will not be introduced in the next sixth months, and everything to do with how to cut the deficit. Osborne (and Labour?) want to do it in part by making the poorest even poorer, while David Laws and IDS are opposing this. Well done David and IDS!
Well, this is good news – a campaign. Now, all we need to do is learn how to deliver an integrated campaign.
That means that when someone decides that it would be a good idea for someone like David Laws to write an open letter to his Leader, there is material distributed beforehand to every councillor and campaigner to use so that they can mount and lead a local campaign on the same issue, on the same day.
Why do I doubt that there was this co-ordination? Why do I doubt that the Campaigns Department knew anything about it? Why do I doubt that ALDC knew anything about it?
I agree for once. Well done David Laws and IDS.
However … I notice that inflation for people on low incomes is higher than everyone else because of the proportion they spend on food and fuel – 2 items where prices are going up more than overall inflation.
So the bad news is that poverty is increasing and at this moment in time is very easy to make worse and very hard to fix.
A ‘below inflation’ increase would be accepetable if that meant below the September 5.2% inflation figure. Basing the uprating of benefits on one month’s random inflation figure would seem a pretty arbitrary choice.
I would agree that it would make more sense to use a 3 or 6 month or previous year inflation average. Of course this goes both ways. This year that would mean a lower benefits uprating. In another year when the September figure was particularly low that could mean a higher than otherwise uprating.
Of course this would only be fair if such a system was stuck to. If we took an average when the september figure was high, thus lowering benefits, but insisted on taking the one month september figure when the september figure was low, thus lowering benefits, then this really would be an unfair and unacceptable attack on the poor.