Rishi Sunak hinted that his plans to ramp up benefit sanctions would enable him to increase universal credit and “better support” those who need help.
Last week the Government announced out of work benefit claimants will be stripped of support if they do not move into work and the long-term sick will be encouraged to find suitable employment.
The measures, announced ahead of the Autumn Statement, are part of a plan to cut the welfare bill and boost the labour force.
And they will be introduced alongside a decision by Chancellor Jeremy Hunt and Work and Pensions Secretary Mel Stride about whether or not to implement a real terms cut for benefit claimants.
During a speech in Enfield, north London, the Prime Minister suggested welfare reforms and sanctions announced last week make it possible for him to uprate benefits fully.
“And by doing all of this… By getting people off welfare and into work… we can better support those genuinely in need of a safety net,” Mr Sunak said.
“So, work for those who can; a generous safety net for those who can’t; and tougher penalties for fraudsters.”
Mr Sunak said the current welfare system was not “sustainable” due to the number of people out of work.
But he refused to be drawn on whether Mr Hunt would announce universal credit would be uprated by September’s 6.7 per cent inflation figure – or if the Chancellor intends to pin it, instead, to October’s lower figure at 4.6 per cent to make some savings.
Mr Hunt has been weighing up both options and made a final decision over the weekend.
No 10 and the Treasury would not comment on speculation that they had decided to offer the full universal credit boost.
Speaking at the college in Enfield, Mr Sunak said: “Our view on the welfare system is that it should be compassionate, it should be fair and it should be sustainable.
“With over two million people of working age who are not currently working, that isn’t a good situation.
“It’s not sustainable for the country, for taxpayers. It’s not fair. But it’s also not compassionate to write people off.
“And over a decade we’ve seen the percentage of people who are essentially deemed not to be able to do any work has tripled. That doesn’t seem like a system that’s working properly.”
Mr Hunt will deliver his autumn statement on Wednesday and will make an announcement on benefits, as well as unveiling his decision on the state pension increase.
Pensioners are set for an income boost of up to 8.5 per cent due to triple-lock which takes the higher of inflation, wages growth or 2.5 per cent. This year the highest metric is wage growth, at 8.5 per cent
HMT sources refused to comment on whether the Chancellor was planning to offer pensioners the full increase or strip bonuses from wage growth to save the Treasury money.
A Treasury minister was forced to deny, on Monday, that Mr Hunt was planning to strip winter fuel cash from wealthy pensioners to help fund other spending.
Junior Treasury minister Gareth Davies said Mr Hunt would not be withdrawing the payments, worth up to £600, after Government minister John Glen was recorded saying the money could be better spent tackling child poverty.
Mr Glen, who was chief secretary to the Treasury at the time, was also caught questioning whether the state pension triple lock was sustainable.
The Telegraph was leaked the comments, made last month, in which Mr Glen said: “I think we also need to come to terms with the fact that the triple lock is very expensive and how sustainable is that going forward in terms of pensions and all the other benefits?
“My mother, she’s not very rich but she’s perfectly comfortable. She just texted me today aged 75 to say ‘I’ve just heard about my £500 winter fuel payment’ and I’m just like ‘you don’t need that’.
“These are the sorts of mechanics of government you’ve got to look at. Is it better if we spent more of that money on child poverty? It probably is. But these are the sorts of things I think we need to look at.”
Mr Davies told Sky News: “We are not going to be touching the winter fuel allowance.”
Pressed on whether he was ruling out means testing the benefit, the MP replied: “We have no plans to change the winter fuel allowance.”