Department for Work and Pensions assessment released before Commons debate as welfare bill passed by majority of 56
Britain’s poorest households will be hit hardest by government plans to limit rises in working-age benefits to 1% in a bid to save £3.1bn by 2016, according to a Whitehall assessment rushed out shortly before Tuesday’s controversial welfare bill debate.
As Labour’s David Miliband signalled a possible return to the political frontline by attacking the government plans as “rancid” – while accepting the overall “envelope” on benefits and tax credits – the Department for Work and Pensions (DWP) admitted that households “further down the income distribution” would suffer the greatest loss of income.
Iain Duncan Smith, the work and pensions secretary, launched a strong defence of the plans, designed to cut the deficit which he blamed on Labour for frittering away money “like drunks on a Friday night”.
But Duncan Smith showed he remains at odds with David Cameron when he gave a strong hint that he would like to see universal benefits for pensioners, such as the winter fuel allowance, abolished at the next election. He told BBC Radio 4’s Today programme: “The prime minister said they wouldn’t be changing anything at all in this parliament. If there are going to be any changes made as a proposal, those are the sort of changes that have to go into a manifesto but you’d have to be talking about those in advance.”
It is an open secret at Westminster that Duncan Smith believes the government’s priorities have been skewed after Cameron gave a commitment during the election to maintain the allowances. No 10 and DWP sources made clear that Duncan Smith accepted Cameron’s pledge and that it was too early to speculate on the manifesto for the 2015 general election.
Means testing universal benefits for the elderly would go some way to covering the savings the government is trying make by limiting rises in working-age benefits to 1% – below the rate of inflation. The winter fuel allowance alone cost £2.1bn last year. Means testing could save £1.5bn a year, according to a CentreForum thinktank.
Pensioners and disabled people will be excluded from the latest changes, which are designed to ensure that in-work and out-of-work benefits will be increased at the same rate as public sector pay. Until now, benefits have risen in line with inflation.
The former Liberal Democrat leader Charles Kennedy led a group of Lib Dem MPs who registered their unease with the bill. Kennedy formally abstained by voting for and against the bill’s second reading. Four Lib Dem MPs, including the former children’s minister Sarah Teather, voted against the bill, which was passed by 324 to 268, a government majority of 56.
Teather attacked her Tory coalition partners, who have spoken of unemployed people idling on benefits. But similar Labour attacks on the government were blunted when the Tories unearthed a speech in 2011 by Liam Byrne, the shadow work and pensions secretary, in which he spoke of “shirkers”.
In his speech to MPs, Byrne seized on the government’s impact assessment, which highlighted how the poor would suffer the greatest hardship. It says: “Households towards the bottom of the income distribution are more likely to be affected and have a slightly higher average change because they are more likely to receive the affected benefits.”
Byrne told MPs: “It makes radically different assumptions to the policy costings that were set out by the chancellor last year,” and he contrasted the £1.9bn annual savings from the cuts with the £3bn-a-year tax cut for higher-rate taxpayers.
David Miliband highlighted the claim by chancellor George Osborne in the autumn statement last month that the bill was designed to tackle the high level of benefits paid to people “still asleep, living a life on benefits” as hard-working neighbours leave for the office. He described the bill, which he said would take five times as much from poor and low-income families as from the richest in Britain, as “rancid”.
The former foreign secretary sparked speculation that he may be eyeing a return to a frontline role when he said Labour should accept it made mistakes in government and that he accepted the coalition’s overall “envelope” in a key area of the public finances.
“The government themselves have projected the total cost of all benefits, all tax credits and all tax relief for the next few years, and I am happy to debate priorities within that envelope. I will take the envelope that they have set, but let us have a proper debate about choices, not the total sum – a priorities debate, not an affordability debate.”
Ed Miliband told the Mirror that the door remained open for his brother, whom he defeated to become Labour leader, to return to the frontbench. He said: “It was a bruising leadership contest and as time goes on that sort of recedes and that’s good for our relationship. But I wouldn’t take it as indication about a change in his view that he’s not coming back to the shadow cabinet, but the door is open.”