Benefit savings could exact a high cost

NICHOLAS TIMMINS

More than one million lone parents, thousands of young people leaving home and up to 150,000 recipients of industrial injuries benefits are to be hit in a fresh round of savings, which will in time take almost another pounds 1bn a year out of the social security budget, according to the leaked correspondence from Peter Lilley to William Waldegrave, Chief Secretary to the Treasury.

The freeze in lone parent premium and one parent benefit will hit well over one million single parents - depriving them of a 3.9 per cent inflation- linked increase next April. In addition, the pounds 5.20-a-week lone parent premium paid to single parents on income support will be abolished for new cases.

The real terms cut in the value of benefits marks something of a departure for Mr Lilley, the Secretary of State for Social Security, who has argued that benefit rates "by and large" are "not hugely generous" and that they "don't enable people to live the life of Riley." In the main, his approach has been to restrict the numbers eligible for benefit rather than reduce the individual amounts paid.

The pressure for fresh cuts in social security is such, however, that Mr Lilley has agreed to savings which rise from pounds 400m next year to pounds 1bn a year in three years time, on top of the pounds 4bn that the Government has already removed from the social security budget by the end of the century - chiefly by introducing the revamped incapacity benefit, the jobseeker's allowance, and cuts to housing benefit.

These, however, look set to go further, with Mr Lilley suggesting that in future those aged under 25 could be pressured to live in bedsits, flats or hostels, rather than in self-contained flats of their own, by restricting their housing benefit payments to the cost of shared accommodation. That would produce savings of pounds 10m next year, rising to pounds 65m a year by 1999, according to the letter.

The most controversial saving, however, will come from the changes to lone parent payments. Almost one million people receive the non-means- tested one parent benefit of pounds 6.30 a week, which is to be frozen. The means-tested lone parent premium, worth pounds 5.20 a week and paid to people on income support, will also be frozen, while new claimants will no longer receive it.

Mr Lilley has also offered a saving on industrial injuries benefit that will cut the numbers receiving the reduced earnings allowance. That allowance - which makes up the difference between what a worker earned before their injury and what they can earn now - was abolished for new claimants in 1990, unless their injury occurred before then. It pays up to pounds 38.12p a week to 150,000 claimants, but Mr Lilley's officials have now found a way of increasing the numbers who move off the supplement to the much lower retirement allowance. This pays only a maximum of pounds 9.53 a week, or a quarter of the earnings allowance if it was less than the pounds 38 maximum. The housing charity Shelter protested that youngsters would be hard- hit.