Ministers reconsidering inflation-linked benefits amid economic turmoil

Benefits must not be increased in line with rising inflation, a minister has suggested while insisting the government’s plans to cut taxes in favor of the wealthiest go ahead.

Treasury Secretary Chris Philp said a pledge by former Chancellor Rishi Sunak to increase benefits in line with inflation was being considered after various government departments were reportedly asked to draw up efficiency-saving plans.

The move, reported by the BBC and others, would aim to reduce future government debt following the post-mini-budget economic turmoil.

Liz Truss is expected to be questioned publicly on her economic plans for the first time after the fallout from the mini-budget on Thursday when the Prime Minister tours regional BBC radio stations in a morning interview session.

On Wednesday, the Bank of England launched an emergency bond-buying program to keep borrowing costs from spiraling out of control and avert a “material risk to Britain’s financial stability”.

The bank announced it would step in to buy up to $65 billion worth of government bonds.

The market turmoil had forced bond funds to sell government bonds to assuage worries about their solvency, but this threatened to incur heavy losses.

After the bank’s intervention, Mr Philp insisted that a change of course by the government was “not at all” being considered.

“Growing the UK economy is so important. Important for raising wages and important for paying future tax bills,” he told Sky News.

Responding to reports that Cabinet ministers were being asked to draw up efficiency savings for their departments, Mr Philp told ITV’s Peston: “We will look for efficiency gains wherever we can find them.”

He added the goal of the exercise is to ensure the government sticks to its existing three-year spending limits.

“These efficiencies will firstly ensure that we stay within those spending limits,” Philp said, “and secondly, within those spending limits that we will stay within, they will enable us to target things that will spur growth.”

The minister defended the cut to the 45p income tax rate, which is said to bring most of the benefits to high earners, claiming it was just “one twentieth” of the “fiscal firepower” announced last Friday.

But Mr Philp told ITV the Treasury would not commit to an expected increase in benefits in line with inflation.

Pressing the decision, Mr Philp said: “I will not be making any political commitments on live television, it will be reviewed in the usual way, we will take a decision and it will be announced, I am sure of that in the first place in the House of Commons .”

Mr Philp was previously joined by fellow junior minister Andrew Griffith in defending the government’s plans, with neither the prime minister nor the chancellor being seen or heard from anywhere in the business community.

However, Ms Truss is likely to face scrutiny on Thursday morning as she will tour regional BBC radio and answer questions from the British public when the markets open.

It all comes just days before Tory MPs and thousands of Members are set to descend on Birmingham for Mrs Truss’ first party conference as Prime Minister.

Some of the party’s “big beasts”, including losing leader Mr Sunak, are reportedly not attending the conference.

The government has clearly lost control of the economy

Other Tories, including Treasury Select Committee chair Mel Stride, have warned “there is a lot of concern within the Parliamentary party, there is no doubt about that” about the economic outlook.

Mr Stride also urged ministers to provide an independent analysis of their economic plans for the Office of Budgetary Responsibility as soon as possible.

Labor leader Sir Keir Starmer, meanwhile, urged the government to recall Parliament to deal with the escalating crisis “before any more damage is done” as his party’s conference in Liverpool drew to a close.

Sir Keir said: “The move by the Bank of England is very serious. And I think a lot of people are going to be very worried about their mortgage right now, about rising prices and now about their pensions.

“The government has clearly lost control of the economy.”

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https://www.newschainonline.com/news/financial-news/ministers-reconsidering-inflation-linked-benefits-rise-amid-economic-turmoil-295125 Ministers reconsidering inflation-linked benefits amid economic turmoil

Mike Fahey

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