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Government to put end to benefits and inflation link

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18/09/2012
The Government is considering replacing the current practice of increasing benefits in line with inflation, according to the BBC.

The move, if implemented, would instead see annual increases in many benefits brought into line with average pay.

The plans, which would affect both jobseeker’s allowance and housing benefit, were first mooted in September last year, when above average inflation figures of 5.2% forced Chancellor George Osborne to consider cost-cutting measures.

It was opposed by a combination of work and pensions secretary Iain Duncan Smith and the Liberal Democrats.

The new move is set to be especially unpopular with Liberal Democrat activists, who meet in Brighton this week for the party’s annual conference.

The Institute of Public Policy Research estimated that, if benefits had been linked to earnings, and not inflation, over the last two years, jobseeker’s allowance would be a weekly £66.81 rather than £71.

“Benefits are rising faster than earnings; this does not encourage people to go to work. Benefits were never meant to be a salary replacement,” a source told the BBC.

“We are aware that there is the effect on poverty to be considered but we believe that benefits have risen by so much over the last few years that a freeze for a couple of years would help people deal with the transfer. When you see the savings possible, it is simply mind-boggling.”

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