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The prime minister personally put the brakes on the plan for a flat-rate benefit worth around £140 a week after realising that millions of people would either lose out – or fail to benefit from – the new system.
The policy, confirmed in George Osborne’s controversial March Budget, is the latest to be re-examined after ministers underestimated its potential political fallout. Ministers, already smarting from the row over the “granny tax”, recoiled at the prospect of another backlash from pensioners.
Mr Osborne has insisted that the reform is “revenue neutral” and no additional money will be available in the short term to cushion the reforms. Although the changes are supposed to save money in the longer term, the chancellor expects additional costs may arise in the 2030s. His concerns confirm the problems facing the coalition in trying to push through highly ambitious pension and welfare reforms – including the creation of a universal credit – at a time when tight public finances make it harder to soften the blow for those who lose out.
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