Welfare cuts could go further than expected - and even double, sources warn

How have Tory MPs reacted to the Treasury's plan? Deputy Political Editor Anushka Asthana reveals what Conservative sources have told her

The Treasury is seeking welfare cuts much bigger than suggested so far, according to sources, with some claiming they could aim for at least double the £5bn savings from uprating benefits by earnings rather than inflation.

ITV News has been told that the Chancellor sees the Department for Work and Pensions as critical to helping him produce the fiscal plan due on November 23rd or earlier. 

Sources- including some inside the Treasury-  said the government’s commitment to protecting other major departments like health and defence made it inevitable that big cuts would be sought from DWP. 

But a spokesperson for the Treasury suggested that anything linked to the fiscal plan was pure speculation - until the Office for Budget Responsibility delivered a final forecast.    

The idea of uprating benefits by earnings rather than inflation has already caused a backlash - with some Cabinet ministers openly arguing against that move, and others privately opposing it. 

But raising far more than £5bn would require the DWP to go further, and consider a number of other measures - such as pulling forward when the state pension age rises, means testing benefits that are currently universal, or even cutting housing benefit or universal credit. 

Although the prime minister has made clear that she will protect the pension triple lock, another money saving option would be to consider whether that remains after the next election. Treasury sources have suggested that could be on the table.  

Meanwhile, sources at DWP said they could not comment on the suggestions but did admit that any government wide savings were likely to affect such a large spending department.

Chloe Smith, the Welfare secretary, speaking at Conservative Party Conference. Credit: PA

At Conservative conference, comments by Chloe Smith, the welfare secretary, were widely interpreted as suggesting she would resist certain cuts. She has insisted “protecting the most vulnerable is a vital priority for me” but also that she supports ensuring there is a work incentive for those who can move into employment. 

 That suggests that she will be most worried about any mooted cuts to disability benefits. 

The suggestion of even bigger cuts could increase tension within the Conservative party over an issue that already resulted in Penny Mordaunt making clear she would oppose uprating by lower than the level of earnings. 

Jacob Rees-Mogg is also said to privately oppose the idea. Meanwhile, backbench MPs have warned of a major rebellion on the issue. 

But senior figures in government have argued that it is not right for those on benefits to have higher increases than those in work- with Home Secretary Suella Braverman making clear her support for real-terms cuts. 

Tony Wilson, director of the Institute for Employment studies, warned that sweeping cuts could result in "serious social or economic harm".

"The brunt would inevitably be felt on those with the lowest incomes at a time when higher food and energy costs are already pushing people to the brink. 

"But even if they targeted the cuts at those slightly better off like working claimants, it would just serve to undermine incentives to work at precisely the time that many of the costs of working - like travel, childcare and rents - are going up," he said. 

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