George Osborne clears path for tax cuts in Budget with £1bn benefits raid More than 600,000 disabled people will lose a portion of their benefits payments in a move that will save £1.2billion by 2020 and could allow the Chancellor to cut taxes for the middle classes.
Ministers on Friday announced that more than 600,000 disabled people will lose a portion of their benefits payments, in a move that will save £1.2billion by 2020. It gives the Chancellor extra money, which insiders believe he could use to cut taxes in his Budget next week.
The Chancellor is set to raise the threshold at which people start paying 40p tax, in a move that could see hundreds of thousands of people pulled out of the higher rate of income tax.
Mr Osborne wants to “accelerate progress” towards the Conservative’s manifesto pledge of raising the threshold for the 40p rate to £50,000 in 2020, it is understood.
The decision to slash disability welfare payments by as much as £140 a week will be controversial, with campaigners last night warning that the cuts will be “devastating”.
The disability benefit, known as the Personal Independence Payment (PIP), is one of the most expensive elements of the welfare Budget.
According to the Office for Budget Responsibility, Britain’s financial watchdog, Personal Independence Payments were forecast to cost £15.4billion in 2015-16.
It said that spending on the benefit is £1billion-a-year higher than had previously been forecast because more people made successful claims than expected.
Critics have previously warned that successive Governments have failed to reform disability welfare payments because of the sensitivity of the issue.
Tony Blair in 1997 faced protests outside Downing Street over plans to reform welfare payments to the disabled.
The current Conservative Government faced a series of demonstrations over plans to cut a fund which pays for carers to help disabled people in their homes.
In June last year a group of protesters attempted to storm the Chamber in the House of Commons.
Under the plans announced on Friday, people will be less likely to receive disabled benefits if they use aids such as a handrail or a walking stick to get dressed or use the toilet.
Currently, the rules require disabled people to have a certain number of “points” to determine how much money they can claim. People need eight points to be paid the standard rate of the Personal Independence Payment (PIP) or 12 points to get the “enhanced” PIP.
The chance announced yesterday means that from next year, people will only earn one point – instead of two – if they need aid to help them to use the toilet or get dressed.
It means that around 640,000 will see their benefits cut, the Government said.
The cuts raise the prospect that Mr Osborne will not now break the Government’s self-imposed benefit cap of £150billion. It was believed that he would breach the cap after last year abandoning a plan to cut tax credits.
Justin Tomlinson, the minister for disabled people said: “The introduction of Personal Independence Payment to replace the outdated Disability Living Allowance for working age claimants has been a hugely positive reform.
“But it is clear that the assessment criteria for aids and appliances are not working as planned. Many people are eligible for a weekly award despite having minimal to no extra costs and judicial decisions have expanded the criteria for aids and appliances to include items we would expect people to have in their homes already.”
Labour described the changes as a “huge blow” and said the Conservatives are “ignoring the views of disabled people, carers and experts in the field”.
Liz Sayce, chief executive of Disability Rights UK, added: “This change is another unwelcome blow to disabled people’s independence, and will impact on people’s ability to work, enjoy family life and take part in the communities they live in.”
It came as an analysis by the Institute for Fiscal Studies found that raising the higher rate threshold to £45,000 would see 300,000 fewer people pay the higher rate.
More than 1.6million people have been dragged into the higher rate of tax since 2010 after Mr Osborne repeatedly froze the threshold. A total of 4.6million people are now higher rate taxpayers, including nurses, teachers and police officers.