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Friday, February 3, 2023

Liz Truss is Poised to Make a Significant U-turn about a Real-term Benefit Cut

The welfare debate threatened to overshadow Liz Truss' bid to reassert her power

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Sadaf Hasan
Sadaf Hasan
Aspiring reporter covering trending topics

UNITED KINGDOM: Liz Truss is on the verge of making another significant U-turn after Tory MPs warned her she would lose a vote on implementing a real-term cut to benefits, despite the fact that new analysis indicated the action might force an additional 450,000 people into poverty.

The welfare debate threatened to overshadow Liz Truss’ bid to reassert her power when the Commons reconvenes on Tuesday, despite frantic appeals for party unity from senior ministers following weeks of harsh infighting.

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Senior Conservatives, including former chancellor George Osborne, warned that the Conservatives were risking a wipeout in the next election by engaging in a “political experiment,” and new threats of measures to remove Truss if she digs in were also discussed by MPs over the weekend.

Government whips were warned that dozens of Conservative backbenchers would rebel against benefit increases that matched wage growth of roughly 5.5% rather than September’s inflation rate of about 10% during their ring-around of colleagues on Sunday.

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Following Kwasi Kwarteng’s announcement that the top rate of tax would be eliminated in the mini-budget, Liz Truss this week reversed course to reinstate it, giving some Tory MPs hope that they can compel another climbdown. She caved on 45p, so she’ll have to do it again, one said.

As a sign that Liz Truss was softening her position, a No. 10 source insisted that “nothing is decided” and added, “She would listen.”

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It came at a time when a new analysis by a conservative think tank revealed that low-income families with children or people with disabilities would bear the brunt of any move to increase universal credit and other working-age benefits in line with earnings rather than inflation.

According to the Legatum Institute, such a move would increase relative poverty rates in the UK, which are currently at their highest levels this century as millions of people are struggling to consistently pay their rent and put food on the table due to the cost of living.

Even with the government’s energy assistance programmes, Legatum predicted that this winter, more than 1.5 million more individuals in the UK would be living in relative poverty than there were prior to the Covid pandemic. Real-term benefit reductions starting in April would raise the overall number to 16 million, or close to a quarter of the UK population.

Tory peer Lady Stroud, CEO of Legatum, urged ministers to raise benefits completely. She said that many people on low incomes would face a winter of difficult choices between heating their homes, putting food on the table, and putting petrol in their automobiles to commute to work.

Increasing benefits in line with earnings rather than -as is customary-September price inflation would result in 450,000 more people living in poverty in 2023–24, according to the Legatum Institute estimate. Of those, 350,000 would be living in working households, and 250,000 would be in families with disabled members.

A quarter of a million additional individuals would fall into “deep poverty,” which is defined as having an income that is at least 50% below the official poverty level. People who live in extreme poverty struggle constantly to pay for necessities like food, energy, clothing, and toiletries. They are in a state of near destitution.

Legatum also simulated the effects of a real terms cut that was significantly deeper—freezing payments at 2022 levels. As a result, 1 million more individuals will live in relative poverty in the next year, including 700,000 people in extreme poverty.

The findings were confirmed in a separate study by the nonprofit Child Poverty Action Group (CPAG), which found that if benefits were increased in line with salaries rather than inflation, 200,000 children—almost all of whom are in homes with one working parent—would live in poverty.

Low-income families would reportedly be about £400 worse off annually as a result of real terms cuts, according to an analysis by consultants Policy in Practice. For some demographics, the reduction is much more pronounced: households with employed individuals lose £458, while families with children suffer a £640 loss.

Also Read: UK’s Liz Truss Reassures Her ‘Controversial’ Economic Plan

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