Can anyone explain to what difference changing the way benefits are calculated will mean?

[bytheMoonlight]

I know changing it from to RPI to CPI will lower the amount benefit rises by, but what does it actually mean in real terms?

Can anyone explain how much of a finacial difference will make?

Osborne really is a clueless tosser, they shouldn't let posh idiots play with stuff they don't understand.

If you have a look at this graph showing RPI vs CPI over the last two years you can see how the two have compared. RPI and CPI have usually been quite close together. At the moment RPI is higher than CPI. A year ago the position was reversed.

Chil - the last two years may have been a blip. I gather that CPI has been below RPI for most of the last two decades. And we all know mortgage interest rates can't stay at their current historically very low levels for long, so RPI is bound to go up.

I wouldn't be too quick to predict a rise in mortgage interest rates. There are no signs of inflation taking off any time soon - the usual precursor to interest rate rises. Long-term fixed mortgage rates being offered are still extremely low by historic standards. The way the economy performed between 1990 and today is possibly not all that relevant.

Fair point. How long do you think cheap fixed rates will be around? Ours runs out in about a year's time...

I am not sure about interest rates.

Inflation is already a bit too high. The government spending cuts will decrease inflation, but the VAT rise will increase it a bit. I think it will slowly decrease over the next year or so. If inflation looks too low there is scope for quantitative easing.

I am not sure when interest rates will start to rise but my best guess is it will be at the end of next year.

However many variable rate mortgage rates and business loans are calculated not from the BoE base rate, but from market gilt rates. And because of the spending cuts these rates have fallen by about 0.5%, which will be a nice boost.

Long-term RPI has always been higher than CPI, and I can't see that changing in the near future. I don't think any change to the way benefits are uprated will be immediately noticeable to anyone at all in the short-term though.

Remember the outcry about the 42p rise in pensions (or whatever it was, it was insulting)?

I think if you are on benefits, which are what, £65 a week for a single adult, every penny counts. The difference between RPI and CPI may hit people hard, especially as it means benefits won't be increasing in line with the costs of living.

Almost by definition CPI is a better estimate of the "cost of living" than RPI - people on out of work benefits are not going to be in a position to buy houses.

Actually I don't know why we have two separate measures of inflation at all. It seems quite arbitrary to me.

We don't have one measure of inflation including the costs of running cars, and another measure excluding them - even though there are lots of people who do not own cars and drive. Why are houses different?

"people on out of work benefits are not going to be in a position to buy houses."

Maybe not but. Some people already have mortgages and service charges etc.

Many of these are on benefits due to complex issues such as childcare issues because husbands have left, redundancies, having been carers (and saving the govt money by doing so), disability etc. This budget will not 'encourage' them to find work. It will further alienate, stigmatise and marginalise them.

It will force their children to evaluate whether it is worth making similar great sacrifices to care for others. And will lead to a more selfish society.

Poverty is cumulative.

There is a 3 month wait for help with mortgage interest, a 12 week wait for DLA - after completing the complicated process, and if you have service charges, loans etc. It quickly gets worse.

Carers allowance is already pitiful and it is not possible to live on it in my experience. Private full-time carers save the government a whole lot of cash, work impossibly long hours and in my experience often don't have time to take care of thier own health as a result.

DLA is to help with EXTRA costs associated with disability (i.e. payng for taxis when you cant walk / drive, for care needs such as help preparing meals or washing) Taxi fares are governed by fuel prices, wages go up with inflation and needs for these things don't reduce and can't be fiddled with like statistics.

I only hope that when Mr Osbourne reaches old age he is not like many of us will be; dribbling, terrified, and unable to take himself to the loo without assistance. And that he has a member of his family still willing and able to love him enough to make that sacrifice. If he is not having nightmares about it - then he should be.

As the government aim to save money then you can guarantee that rating benefits by CPI instead of RPI then the rates will be lower.

One of the other changes is to the way housing benefit is rated, which means people will have to pay out more of the 'minimum required to survive' on rent. Housing Benefit rarely covers rent now so this is a policy enacted to further punish the poor - changes in rates are shown here: www.guardian.co.uk/news/datablog/2010/jul/15/housing-benefit-cuts-local-analysis And this is before the introduction of a ten percent cut in people's HB when they have been out of work for a year. A policy which will lead to huge numbers of evictions. And then there is the capping which will increase homelesness in London in particular.

Bear in mind that these punishing policies will apply to anybody who claims job-seekers allowance, including everyone with children over 6 by 2013 (8 in 201o), therefore the children of the poor are also being punished.

And if you have a mortgage, the way that interest payments paid for by by your NI contributions if you are unlucky enough to lose your job was also changed in the budget - obviously to a lower rate.

All these things will end up costing the state more in the long run, but they are not being done for financial reasons. These are ideological policies for smashing the working class.

yes earwicga am sympthetic to your analysisbut it is all very complex, and will worry many people We are all init together is a nonsense,The PM should withdraw it

George Osbourne formally known as Gideon ( he changed his first name to be more acceptable to us the tax payer)
Best Pal of Dave and Boris.....out to swipe all the goodies and bring about the 'hard-time' like Victorian UK again...Luvvverly job boyzzzzz.

You can bet how they will work out cutting the benfits will be a mystery to all who will suffer the consequences all the Con/Dem's have no worries and Labour are lost not mounting and opposition right now.....so we are all thrown to the Con/dem wolves.....and I feel for those who have the least...and we all deserve soooooo much better, BUT who voted for them?????