Why the government looks set to target the welfare bill to try to balance the books

Credit: PA

If the government is going to show how it plans to balance the books in November, then even with the most optimistic outlook on growth possible - and obviously market reaction makes that much harder - the government will have to start thinking spending cuts.So where do we spend a lot of money?

1- Health? But with big promises to fix NHS and social care, they won’t cut that.

2- Education? Liz Truss denied any cuts there when I asked in New York.

3- Defence? Erm, no, a huge promise to increase spending. Which leaves us with...

4- Welfare.

Welfare, in fact, is huge. Look at this from think tank Institute for Government from 2018/19:

Credit: The Institute for Government

And Liz Truss hasn’t made any promises. In fact, in budget they increased conditionality for people in part time work (another story I’ll come to).Now you may remember the row over a decision to stick to the benefit uprating rules earlier this year in April.

Former Chancellor Rishi Sunak faced criticism for uprating benefits by 3.1% based on the inflation rate from September even though inflation had risen a lot higher by April.But he indicated that the next uprating would be in line with this September’s inflation rate, which as we all know, is very high. If the government stick to that promise - and pressure to do so will be huge as people are really suffering - it will cost a lot.Which is why a lot of people I speak to in this sector are now talking about the possibility of the government trying to save money on welfare, and perhaps specifically by not uprating benefits in line with inflation as Rishi Sunak promised as chancellor.

Here is what Rishi Sunak said: "I can reassure the House that next year, subject to the Secretary of State's review, benefits will be uprated by this September's CPI which, on current forecasts, is likely to be significantly higher than the forecast inflation rate for next year.

"Similarly, the triple lock with apply for the state pension."I’m told uprating benefits in line with current inflation calculated by the Treasury to cost around £3bn per annum. An alternative option would be to uprate in line with earnings - this would be lower.

It would not technically be a spending cut however so I think it’s a likely target for government.

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