Page last updated at 15:31 GMT, Thursday, 10 December 2009

Alistair Darling denies benefit rise pre-election 'con'

Alistair Darling: ''The situation will stabilise as we come out of recession''

Chancellor Alistair Darling has hit back at Tory claims his decision to increase some benefits in his pre-Budget report was a "pre-election con".

The claim came after it emerged Mr Darling did not set aside funding to pay for rises for more than one year.

Mr Darling told BBC Radio 4's Today the increases, in child and disability benefit, were "not temporary".

It comes as a think tank says the cost to families of paying back the national debt is £2,400 over eight years.

The Institute of Fiscal Studies said the pre-Budget report implies £15bn in spending cuts not yet identified by the government between 2011 and 2014 - which taken together with tax increases will impact on family finances.

The think tank says the government will have to cut 6.4% per year in order to protect schools, hospitals and increase overseas aid.

Defence, higher education, transport and housing are most likely to be hit, the IFS says.

BBC Economics Editor Stephanie Flanders said the IFS analysis also suggested the tax rises in the pre-Budget report would "overwhelmingly" impact on the top 10% of earners.

"Their income, if nothing else changes, will be cut by 5% by 2012," she added.

'Honest'

In a BBC Radio 4 Today programme interview, Mr Darling defended his decision to delay vital spending decisions until after next year's general election.

He said he had not carried out a full spending review because of continued economic "uncertainty" but insisted spending growth in non-protected areas would be "pretty much flat".

How much each department gets will depend on unemployment levels and how much money they have been able to squeeze out in efficiency savings, the chancellor suggested.

"Frontline" spending in schools and hospitals will be protected from cuts, he stressed.

In Wednesday's pre-Budget report, Mr Darling announced a 1.5% rise in child benefit and disability benefits from April - just weeks ahead of the expected date of the general election.

He also announced an above-inflation 2.5% increase in the basic state pension.

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This was followed on Thursday by an announcement that jobseeker's allowance and incapacity benefits would rise by 1.8% from April next year.

Mr Darling said he was waiving the normal requirement to link the rise to the rate of inflation the previous September, as this would have led to the benefits being frozen because inflation was negative at that point.

But the Conservatives pointed to Treasury documents suggesting the benefits would rise in April 2011 by less than whatever the inflation rate-linked rise should be.

Shadow chancellor George Osborne, for the Conservatives, said the government's economic plans should be "honest".

'Electioneering'

Mr Osborne told Today: "We have got to stop having a pre-election con where you put benefits up weeks before a general election and cut them afterwards."

But Mr Darling denied "electioneering" with the increases, insisting that the benefits would be reviewed again in 12 months' time and said the extra cash will not be taken back.

George Osborne criticised the ''cynical'' pre-Budget announcements

He told Today: "I was quite deliberately bringing the thing forward, because otherwise you would have had a situation where these benefits were frozen and I thought that would be a little bit unfair.

"A 1.5% increase in benefits I don't think can, with the best will in the world, be called electioneering.

"It is not a temporary rise, it is a rise we have put in this year and it is not going to be taken back. We will look at it again next year."

'Foolish things'

Lib Dem Treasury spokesman Vince Cable said the government should "spell out honestly to the electorate some of the things that would have to be cut".

Vince Cable: ''We all have to be much more honest with the electorate''

He said Mr Darling was right not to "rush into" spending cuts - but he said no areas should be "ring-fenced".

He told Today: "I think the more you impose ring fences and restrictions and sacred cows, the more difficult it is then for everybody else, and often very damaging cuts have to be made elsewhere."

Mr Darling is also facing Tory claims his plan to raise National Insurance by an additional 0.5% "will lead to a real cut in health spending" because of increases in its vast wages bill.

Shadow chancellor George Osborne said the National Insurance rise would leave the NHS with a £446m-a-year bill - although health charity The King's Fund said it would be more like £300m because of the way the tax is calculated.

Health Secretary Andy Burnham said he was "amazed" the Tories were using this line of attack, as health spending increases were "locked in" and the £10bn efficiency savings ordered by the chancellor would be reinvested in patient care.

'Scorched earth policy'

"The NHS is getting a 5% increase next year because of the National Insurance increase. It will lock in that uplift for years to come," he said.

But he also conceded, in an interview with BBC Radio 4's The World at One, that government departments not protected from cuts faced a "difficult outlook".

Shadow health secretary Andrew Lansley said the National Insurance increase would mean a "real terms cut from 2011" in health spending - adding that the Tories would increase NHS spending annually paid for by cutting costs elsewhere.

He accused the government of pursuing a "scorched earth policy" by temporarily putting up benefits ahead of an election.

The government said "difficult decisions" had to be made in order to reduce the UK's £178bn deficit by halve within four years but any spending cuts would come when the economy was growing again.

In his pre-Budget report, Mr Darling said there would be a 0.5% rise in National Insurance, on top of a 0.5% rise already announced, and a 1% cap on public pay settlements from 2011.



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