Jan. 8 (Bloomberg) -- U.K. Prime Minister David Cameron defeated opposition plans to block legislation for a cap on welfare payments after threats of a parliamentary rebellion and a warning that the changes will hurt the poor the most.
The Welfare Benefits Up-Rating Bill, which passed a second reading in the House of Commons in London today by 324-268, is intended to limit increases in so-called social-security payments to 1 percent for two fiscal years starting in April 2014. The Institute for Fiscal Studies said yesterday that 2.5 million workless households out of 2.8 million getting help will be worse off by an average of 215 pounds ($345) in the second year. Consumer-price inflation was 2.7 percent in November.
Sarah Teather, a former education minister from Cameron’s Liberal Democrat coalition partner, said she would vote against the plans. She condemned the government proposals as “petty games,” citing rhetoric from ministers that pits “strivers versus skivers.” Conservative Chancellor of the Exchequer George Osborne has pledged to help the “strivers” who go out to work while people on benefits stay home with the curtains closed.
“The bill is about picking up the pieces, sorting out the deficit and being a responsible government,” Work and Pensions Secretary Iain Duncan Smith told the House of Commons in a debate ahead of the vote. “The reality is that we are reforming the welfare system to make it better and easier for people who are in part-time work to have improved incomes.”
Osborne extended his austerity program by another year in his autumn statement last month as the government struggles to find ways to save money. While about a third of government spending goes on welfare, most of that is used to pay state pensions. Jobless benefits account for about 2.6 percent of all expenditure, while support for those in work accounts for about 20 percent, according to the IFS.
“We are learning today who is being asked to pick up the bill for this catastrophic economic failure,” said Liam Byrne, who speaks for the opposition Labour Party on welfare. “It is not Britain’s millionaires who are picking up the tab, it is Britain’s working families. The measures in the bill are a strivers’ tax, pure and simple.”
Political parties in recent weeks have hardened their rhetoric against welfare amid polling evidence that such policies are popular with voters. Last week, the Labour Party called for a compulsory jobs guarantee for the long-term unemployed, making state welfare payments dependent on paid employment.
“Ministers think that the benefits up-rating cap will bring them a political dividend that is as effective at delivering votes as it in reducing the living standards of millions of people on low to middle incomes,” Frances O’Grady, the new general secretary of the Trades Union Congress, said in an e-mailed statement. “Support for the measure depends on voter ignorance. Those with the most inaccurate view of the current system are the most likely to support change.”
Duncan Smith denied the government was treating retirees as a “protected species,” saying the long-term cost of pensions will fall sharply as a result of changes now under way.
“Fairness to pensioners is to give them time and make sure you support their income, and at same time reform the way they save,” he said.
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