Jeremy Hunt warned that the costs of welfare benefits were rising uncontrollably. He pledged to cut the welfare bill “further, faster and more dramatically”.
In an interview, the Chancellor said that he also wanted to reduce National Insurance by 2p prior to the election. However, he stressed that he only would do so in a responsible way.
Hunt said that reducing the benefit bill and getting more people to employment would be a major part of the Conservative Manifesto. He was trying to draw a line between Tories and Labour in regards to welfare.
He said that “too many” people are “labeled” as having mental health issues and “parked” on benefits “outside of work” indefinitely.
He said that over-labelling was becoming a growing concern in the Government. Work and Pensions secretary Mel Stride is leading a campaign to “change equations” regarding welfare.
He said that the government was planning to expand its “stick-and-carrot” policy, including tougher sanctions against people who refuse work and more support for those with mental issues to prevent them from quitting their jobs .
Mr Hunt said that if you are on benefits and not working, it will only make the problems worse. Mel Stride’s insight is great and we support him in his efforts to accelerate the reforms.
Mr Hunt said: “It’s not sustainable for us to continue increasing our welfare spending at the rate we do.”
The Chancellor hinted at the Tories’ intention to continue reforming the public sector in order to boost productivity.
When asked what he is doing to combat worklessness and make it pay to work, Mr Hunt replied: “Let’s just say this. I think you will see in our future manifesto further plans to address the issue. We are working hard on this issue in the Government, because we believe we can reduce the tax burden for working families.
“But welfare reform and productivity are the two pillars that will make this happen. We’ve talked a lot about both of these areas and we plan to say more.”
A record number of 2.8 million people is now economically inactive due to being too sick to work. Since the lockdown, the number of people who are not working has increased. This is the longest-lasting increase in history.
According to the Office for National Statistics (ONS), 9.4 million people between the ages of 16 and 64 are not working or looking for work. The most common cause for this inactivity is long-term illness.
Mr Hunt agreed with Mr Stride, that the UK was over-labelling mental health conditions.
He said: “Labelling can be a problem, if it results in a benefit package which makes people afraid to work for fear of losing the benefits they depend on.
“We have to change this equation, because if someone has moderate anxiety but leaves the workplace it is more likely that they will develop a serious problem than if they stay at work.”
When asked if it was a priority to cut National Insurance by 2p during the next fiscal event, he replied: “We are trying to reduce employees’ National Insurance until we can abolish. Yes, we’d like to cut National Insurance by 2p in the next fiscal event. But we will do so responsibly.
Mr Hunt’s remarks put him in a collision course with International Monetary Fund, which warned that tax cuts before elections will keep Britain’s debt increasing until the end the decade.
The cost of another 2p in National Insurance would be approximately £9bn per year. This will save an average worker £900 annually.
IMF warned that “significant reductions” in National Insurance will “worsen debt trajectory”.
The Institute for Fiscal Studies warned that unless the public spending is brought under control, the next government will be forced to raise taxes.
Martin Miklos is an economist with the IFS. He said that the increase in taxes has been historically and internationally significant, but it has not kept pace with the growth of spending.