Susan Kramer says that Government must unfreeze benefits

Back in July, I told a panel on social security at the Social Liberal Forum conference that in the wake of Brexit, a benefits freeze for four years, which was never a good idea, was entirely inappropriate and we should be opposing it loudly.

Analysis from the Institute of Fiscal Studies confirms that Brexit is going to hit those on benefits and low incomes particularly hard:

Normally many of those on the lowest incomes would be at least partially protected from the impact of higher prices by the rules that govern the annual uprating of benefits and tax credits. By default, benefit and tax credit rates are (with some exceptions, most notably the state pension) increased each April in line with the annual CPI inflation rate of the previous September – higher prices lead to higher benefit rates (albeit with a lag). However, in the July 2015 Budget the Government announced that, as part of its attempt to cut annual social security spending by £12 billion, most working-age benefit and tax credit rates would be frozen in cash terms until March 2020. This policy represented a significant takeaway from a large number of working age households. But it also represented a shifting of risk from the Government to benefit recipients. Previously, higher inflation was a risk to the public finances, increasing cash spending on benefits. Now the risk is borne by low-income households: unless policy changes higher inflation will reduce their real incomes.

I am glad to see that our shadow Chancellor, Susan Kramer, has now said that the Government must reverse its unfair benefits freeze plans:

Theresa May talks about building an economy that works for everyone, but her own Government’s actions now mean that millions of people are seeing their incomes cut to unmanageable levels.

The decision to unnecessarily continue to freeze benefits was already a deeply damaging, but now the Government’s making things even worse thanks to their reckless actions over hard Brexit – putting even more pain on low income families.

It’s time that the Government accepted that unfreezing benefits is not only morally necessary, but also important in injecting vital resources into the economy through spending by those on lower incomes.

* Caron Lindsay is Editor of Liberal Democrat Voice and blogs at Caron's Musings

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9 Comments

  • Martin Clarke 19th Oct '16 - 2:29pm

    Thats fine. But how will it be funded. I sometimes wonder if some people think there is a magical money tree about.

  • Andrew Toye 19th Oct '16 - 4:56pm

    There is plenty of money out there, otherwise how are house prices and corporate profits able to rise? Where did the tax cut money come from? People on benefits also don’t have a “magic money tree” either to make up the shortfall and it is cruel and unnecessary to load all the pain on them.

  • Jenny Barnes 19th Oct '16 - 5:12pm

    Magic money tree. We have a fiat currency, so the government can create money and spend it on useful things. Housing for example. Mostly it goes in wages, and about 40% (income + vat ) comes back as tax. The remaining 60% gets spent on things the workers want, and roughly another 24% comes back… This doesn’t create inflation if there is spare capacity in the economy. Benefits act as auto stabilisers, ensuring that more money is spent when the economy is doing badly. Or should we return to the days of the hunger marches?

  • Martin Clarke 19th Oct '16 - 5:22pm

    I’m not saying it shouldn’t be done, but if we want votes we need to be crystal clear how the increase in benefits is going to be funded. Otherwise it will has the potential to be a massive vote loser.

  • Martin Land 19th Oct '16 - 6:45pm

    Wait till the spring and let’s start issuing helicopter money….

  • Eddie Sammon 19th Oct '16 - 7:03pm

    It nee

  • Eddie Sammon 19th Oct '16 - 7:07pm

    It needs pointing out that those who have benefited from the increase in the personal tax free allowance have often had their benefits cut too because they are based on net income.

    I was furious when I found out a few months ago because it means all that campaigning by the Tories on how increasing the allowance means they have helped the vulnerable is nonsense. It’s mainly helped single people and the middle class.

  • Conor McGovern 20th Oct '16 - 11:23am

    It looks to people like the Lib Dems cut in government and pledge to spend in opposition, and we know what some people think of our pledges! For the record I think this is long overdue – I wish we’d stood on the side of vulnerable people like this in coalition – although setting out the funding for this would help. I think what we need to shine a light on and rediscover as a party is a strong Liberal, basic reason why we back the vulnerable in times like this: not only was it the financial elite who caused the recession and should be held responsible, but the mark of a civilised society is the extent to which we look after those least able to look after themselves.

  • “I’m not saying it shouldn’t be done, but if we want votes we need to be crystal clear how the increase in benefits is going to be funded. Otherwise it will has the potential to be a massive vote loser.”

    Politics has gone wrong if somewhere between thousands and millions of people are suffering and those involved in politics are asking “but would it get us votes?”.

    While I agree that work should pay I fear that this government likes far too much a big stick and little muddy carrot, and even working families are left with a big stick and a maybe washed but still very little carrot.

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