Friday, November 4, 2011

Osborne may end inflation-linked benefit rises

2:18 PM | Posted by Free Game Zone | Edit Post

Treasury officials called for the development of proposals, although the changes should not be made for next year

George Osborne has asked officials of the Treasury is preparing proposals to scrap inflation-linked rises to benefits, but it is unlikely that the changes for next year.

Chancellor is understood to fear that the recipients will see their payments increase by 5.2% next year while public sector workers face a pay freeze until April 2013.

services will increase at a relatively high rate because they are linked to the inflation rate in September this year increased to a maximum of 5.2%.

Osborne has asked officials to consider measures to increase profits at a lower rate. One option is to increase with income growth averaged around 2.5%. There is even a suggestion that some of the benefits could be frozen.

Iain Duncan Smith, the Work and Pensions Secretary, is understood to be concerned about the proposal. While he hails from the conservative right, Duncan Smith is riding on the rules and believes the government must respect its commitments to benefits.

The Guardian understands that Osborne is not expected to change the system for next year when he issued his statement after the fall this month, although the Chancellor may say that it is considering options for the future.

Osborne should adopt a cautious approach because it has already made a major change in determining the level of benefits.
  • In his first budget last year was announced that the increase in profits in line with the inflation rate the lowest in the CPI rather than the highest rate of RPI.
  • The change was controversial and is one of the factors that complicate the government's negotiations with the unions on public sector pensions. The unions are challenging the change in the index, which applies to public sector pensions and benefits, in the courts.
Whitehall sources said the chancellor would be difficult to accept that another fundamental change that soon after the change in the index last year.

But there is a widespread feeling in Whitehall that public sector workers have a complaint when you see profits rise by 5.2%, while facing a pay freeze until 2013.


Nick Clegg, is understood to share the concerns of the Chancellor of the mixed signal of increased profits, while public sector workers, and disturbed by the planned changes to their pensions, to fight a wage freeze deal with a relatively high inflation. However, the Deputy Prime Minister is understood to believe that a cautious approach is needed.


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