What you need to know about Osborne’s working age benefit freeze

Your cut out and keep guide to today'sannouncement on freezing working age benefits.

Your cut out and keep guide to today’s announcement on freezing working age benefits

Chancellor George Osborne has in his conference speech announced a two-year freeze on working age benefits to save £3 billion.

The chancellor argued during his speech in Birmingham that Britain could no longer afford to spend £100bn a year on welfare payments for people of working age.

“The fairest way to reduce welfare bills is to make sure that benefits are not rising faster than the wages of taxpayers who are paying for them,” he said.

“We will provide a welfare system that is fair to those who need it, and fair to those who pay for it too.”

So what does this mean? Well here is your cut out and keep guide to today’s announcement.

– Working-age benefits will be frozen for two years from April 2016.

– This comes on the back of a 1 per cent cap that was announced in 2012.

– As the Guardian has noted, the full list of benefits included in the cap are: jobseeker’s allowance, tax credits, universal credit, child benefit, income support, the work-related activity component of employment and support allowance and the local housing allowance rates in housing benefit. Not included are maternity pay, paternity pay, sickness pay, adoption pay, disability benefits and pensioners benefits.

– The £3 billion the government hopes to save by freezing working age benefits for two years will work out at just 0.9 per cent of the £349 billion in expected benefit expenditure, according to the BBC’s Mark Easton.

– Half of those hit by the freeze (in reality a cut) are in work. In other words, George Osborne will make many hardworking people poorer.

– The chancellor has justified the cut by pointing out that since 2007 earnings have rise by 14 per cent while working-age benefits have risen by 22.4 per cent. However this has more to do with the government failure to ensure that wages keep up with inflation, than with rocketing benefit payments.

– And inflation continues to outstrip weekly earnings. As noted earlier today, the headline rate for average weekly earnings was 0.6 per cent in July – the last set of labour market stats we have. Average weekly earnings growth has only twice been lower – very briefly in 1967 and in 2009, when the financial sector bonuses taken at the beginning of the crash were working out of the figures. Slashing away at benefits to match this is a race to the bottom.

– Executive pay is now 180 times that of the average worker. Ask those at the top to pay a little more to plug the gap; don’t go after the poor.

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