Liz Truss pledges ‘responsible’ approach to public finances but refused to commit to raising benefits

Liz Truss is facing pressure to increase benefits in line with inflation

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Liz Truss stressed she must take a “responsible” approach to the public finances as she faces a fresh battle with Tory rebels fighting real-terms cuts to benefits.

The Prime Minister is refusing to rule out a return to austerity or say whether welfare payments will be increased in line with rising inflation.

Critics who forced Truss and Chancellor Kwasi Kwarteng to U-turn on plans to abolish the 45p tax rate for top earners on Monday are now stepping up pressure on the government to confirm benefits will be raised.

Mr Kwartneg has already made a second change of course to reassure markets and Tory rebels by bringing forward his medium-term fiscal plan along with independent forecasts, while Ms Truss has committed to increase pensions in line with prices. However, on benefits she said “we have to be fiscally responsible”.

Liz Truss is facing pressure to increase benefits in line with inflation (Photo: Getty Images)Liz Truss is facing pressure to increase benefits in line with inflation (Photo: Getty Images)
Liz Truss is facing pressure to increase benefits in line with inflation (Photo: Getty Images)

What has Liz Truss said about raising benefits?

Benefits are usually uprated in line with the consumer price index (CPI) rate of inflation from September, with the rise coming into effect the following April.

The Institute for Fiscal Studies estimates that each percentage point rise in CPI adds £1.6 billion to welfare spending.

In an interview pre-recorded on Monday, Ms Truss told Tuesday’s BBC Radio 4’s Today programme: “We are going to have to make decisions about how we bring down debt as a proportion of GDP in the medium term.

“I am very committed to supporting the most vulnerable; in fact, in addition to the energy price guarantee we’re also providing an extra £1,200 to the poorest households.

“So we have to look at these issues in the round, we have to be fiscally responsible.”

Ms Truss told LBC radio that “no decision has been made yet on benefit uprating”, adding that it “will be taken in due course”.

Pressed on why she has committed to increasing pensions but not benefits, she explained: “What I mean is when people are on a fixed income, when they are pensioners, it is quite hard to adjust.

“I think it’s a different situation for people who are in the position to be able to work.”

The Prime Minister added that she has committed to reducing debt as a proportion of national income over the medium term, adding that she is taking “ fiscal responsibility”.

What have other Tory MPs said?

Commons Leader Penny Mordaunt has publicly backed increasing benefits so that people can afford to pay their bills.

Ms Mordaunt, who ran against Ms Truss in the Tory leadership contest, said it “makes sense” to increase benefits in line with inflation.

She told Times Radio: “We want to make sure that people are looked after and that people can pay their bills.

“We are not about trying to help people with one hand and take away with another.”

Former Cabinet ministers Michael Gove and Damian Green have both spoken out with concerns about any failure to raise benefits in line with inflation, while Mel Stride, Tory chairman of the Treasury Select Committee, said he would have to “think long and hard” if asked to vote to increase benefits in line with earnings rather than inflation.

Mr Stride told Today: “The last time the benefits were uprated, because of the way the mechanism works they’re uprated in April but they’re pegged against the previous September’s inflation, and the way it worked last time was the uprating was just 3.1% because inflation was low the previous September, but of course inflation was much higher than that (in April).

“So we’re coming off the back actually of a kind of quite a strong real-terms squeeze on those benefits already so I think that will be a really tough call to make.”