Money Saving guru Martin Lewis left Number 11 today – as the Chancellor is set to swerve welfare reform in today’s Budget and hand out billions of pounds more to benefit claimants.
John Healey will not curb runaway welfare spending despite growing pressure on the public finances.
Instead, he is expected to increase the tax burden to the highest level on record to help boost handouts.
Mr Healey has set aside £5.5billion to support a 3.5 per cent increase to benefits paid to ten million people, Labour sources told the Daily Mail.
He is also expected to earmark at least another £1billion to subsidise the fuel bills of those on benefits and low incomes this winter.
Speaking ahead of the Budget last night, the Chancellor said his focus was on ‘getting through this difficult moment’ for the world economy.
He said the package would include measures designed to ‘give households breathing space from some everyday costs’, and also pledged long-term action to bring energy bills down in future.
But any immediate support for those not on benefits is expected to be modest, such as freezing NHS prescription charges at £9.90.
Chancellor John Healey with consumer rights champion Martin Lewis outside 11 Downing Street this morning
Chancellor John Healey said his focus was on ‘getting through this difficult moment’ for the world economy
Mr Healey has set aside £5.5billion to support a 3.5 per cent increase to benefits paid to ten million people. Pictured: People queuing outside a job centre in Cambridge
Martin Lewis, right, told followers he’d been in the reception room at number 11 , ‘to meet the Chancellor on energy bills to hear what’s going on’
Mr Healey was accused of an ‘insult to families’ yesterday after the Treasury revealed measures will include tariff reductions worth just 40p a week off average grocery bills, including cutting the price of gherkins.
The Chancellor last night said he would stick to the ‘tight fiscal rules’ laid down by his predecessor, Rachel Reeves.
But sources said he would not set out welfare reforms, despite official projections suggesting sickness benefits will jump from £83billion last year to £109billion by the end of the decade.
Opposition MPs warned that Britain cannot afford to duck welfare reform again. Shadow treasury minister Richard Fuller said: ‘Britain’s public finances are on a cliff edge.
‘A “do nothing” Budget will not solve the problems staring us in the face: a spiralling welfare bill, a crippling tax burden, mounting debt and rising global threats.
‘When we see the Budget, we must ask: Is it fair to take more and more money from hard-pressed working families just to spend it on more benefits?
‘Will more tax hikes and more borrowing make us better off? Labour are running scared of the big decisions necessary to get our country back on track.’
Former work and pensions secretary Sir Mel Stride said: ‘The Chancellor must address the welfare budget. Britain now spends around half a billion pounds a day on working-age welfare.
‘The fastest growing part is sickness benefit. The vast majority of people want to do the right thing but the system is giving them all the wrong incentives. The Chancellor must act.’
The Prime Minister’s former economic adviser Andy Haldane also urged the Chancellor to put a ‘down payment’ on welfare reform in the Budget.
The former Bank of England chief economist said that cutting welfare now could bring down borrowing costs by showing the markets Labour is serious about reform.
And he warned that Andy Burnham’s ability to take on his own MPs over welfare is likely to get weaker the longer he delays action.
‘Andy Burnham is riding as high in the polls as he is ever likely to, he has as much political capital in the bank as he probably ever will have. Now is the time to make these choices.
‘Making them in the second half of next year when the economy is probably weaker, the geopolitical storms are probably lesser, when his popularity is probably lesser, would be a harder choice.’
Ministers have said they cannot act on welfare reform until the publication of major reviews on youth unemployment and disability benefits in the coming months.
But Whitehall sources said the reviews had been deliberately timed to report after the Budget to avoid Mr Healey having to take immediate action.
Government sources said Mr Healey is planning a low-key ‘steady as she goes’ Budget after Ms Reeves hiked taxes by £66billion in Labour’s first two years.
However, he is expected to levy a number of smaller taxes, including a new charge on bank profits, to help fill a black hole in the public finances caused by the Iran war.
The measures risk adding to pressure on an economy already heading for the highest tax burden since the Second World War.
Mr Healey will shield pensioners on the state pension from having to pay income tax for the first time.
But he will continue the long-running stealth tax raid on workers by leaving frozen tax thresholds unchanged.
Figures from the House of Commons Library suggest an extra 580,000 people will be dragged into paying the higher rate of income tax next year, taking the total to 7.7million.
But Mr Healey will find billions of pounds to raise benefits. Most major benefits, including Universal Credit and Personal Independence Payment, will rise by 3.5 per cent, in line with Consumer Price Index inflation from September.
Analysts said the rise would cost the taxpayer around £5.5billion – roughly £2.2billion more than official forecasts predicted in March.
Difficult decisions on defence spending, welfare and departmental budgets will be kicked down the road, fuelling speculation that the Budget could be a springboard for a snap election in the spring.
In a video message last night, the Chancellor said the Budget was ‘designed to give households breathing space from some of the everyday costs, provide targeted support for businesses and self-employed people and to start the long-term action needed to get energy costs down for good.’
Treasury officials were tight-lipped last night about Mr Healey’s plans for energy bills. He is expected to offer a modest package of support for those on benefits and low incomes this winter.
But he will also outline reforms designed to curb bills in the long term. This could include ‘decoupling’ electricity and gas prices to reduce the impact of fossil fuel costs.
Mr Healey is also expected to outline modest increases in defence spending, including filling a £5billion hole in the Defence Investment Plan by cutting Net Zero and road projects.
But he is not expected to commit to raising defence spending to three per cent of GDP by 2030, despite resigning as defence secretary over the issue earlier this year.
