Government 'running out of ideas on welfare reform'

Reports the Government is set to freeze working age benefits - by ending the automatic annual increase in line with inflation - would almost certainly weaken the living standards of low-income families and suggests it is "running out of ideas on welfare reform".

That's the verdict from think tank, the Institute for Public Policy Research (IPPR), which suggests that a further £4 billion could be saved in 2016-17 if all working-age benefits - including jobseeker's allowance and housing benefit - were frozen from 2014-15.

George Osborne has already announced he's looking for £10bn-worth of welfare cuts if reductions to departmental spending are not any greater than in the current spending review.

It has already switched the inflation index to which benefit uplifts are calculated – from RPI to the lower CPI – which the IPPR believes will save the government around £11 billion in 2014-15.

Writing in the Huffington Post, Kayte Lawton, senior research fellow at the IPPR, says if the Government were to break the historic link between inflation rises and welfare payments, further cuts would also be needed to achieve the chancellor's savings target.

However, she said existing working-age benefits have been repeatedly “salami-sliced, with a hodge-podge of temporary freezes and tweaks to eligibility”, without the Government trying to understand the drivers of growing welfare spending.

She said: “Freezing working-age benefits would almost certainly weaken the living standards of low-income families, including the millions of working families who rely on tax credits to top up their earnings. The Coalition's reliance on benefit freezes to curb rising welfare spending also suggests they are running out of ideas on welfare reform.”

She added: “Benefit freezes look like a relatively painless way to cut back on welfare spending, since they are quick to implement and don't require cuts to individual payments. But they are merely a short-term response to the need to close the deficit, not a properly thought-through welfare reform strategy.”