Universal Credit recipients are set to receive an additional £253 in their payments from the Department for Work and Pensions. Approximately seven million people are currently on Universal Credit, with 37 per cent of them employed and the rest either job hunting or not required to work.
Forecasts suggest that a typical low-income family on the benefit will see this inflation-based increase applied next year. However, campaigners argue that this won’t be sufficient as it’s based on September’s Consumer Price Index figure of 1.7 per cent, which was before the Ofgem price cap increased.
From October 1, the energy cap has risen to £1,717 per year for a typical household, marking a £149 or 10 per cent increase in gas and electricity rates compared to the previous £1,568. Analysts highlight that inflation is likely to rise further in the coming months due to increasing energy prices, potentially negating the benefits uprating next April due to escalating household costs.
They are urging the government to use the October inflation figure of 2.2 per cent instead, which would add another £74 to this average Universal Credit increase. They are also calling on Labour to address the disparity between working-age benefits and the State Pension, which is set for a significantly larger 4.1 per cent increase based on the triple lock.
This ensures that pensions rise by inflation, average earnings or 2.5 per cent, whichever is higher, reports Birmingham Live.
According to the Resolution Foundation, a typical low-income family with two children can expect a £253 increase in their annual Universal Credit award from the DWP next April. However, if benefits were uprated in line with October’s inflation rate rather than September’s, the same family would see a £327 rise.
The think tank argues that using September’s inflation figure, which was below the Bank of England’s 2% target for the first time since April 2021, is “badly timed” for low-income households. Resolution Foundation economist Lalitha Try stated: “There was a larger-than-expected fall in inflation last month, but it will rise sharply in October, driven by base effects from energy prices. This temporary fall is badly timed for millions of low-to-middle-income families as it will result in a lower increase in their benefits next year.”
“A more timely measure of benefit uprating would deliver a cash gain to a low-income family with kids of around £74 next year. The Government needs to address the age divide in benefits which has left working-age support fall further behind rising wages and living standards.”
The Joseph Rowntree Foundation, a body dedicated to addressing poverty, has done the math and suggests that if there’s a 1.7 per cent rise, the basic rate of Universal Credit could see an increase of about £1.50 a week from today’s £90.55, whereas couples may see theirs go up by roughly £2.50 a week from the current £145.13.
Iain Porter of the foundation remarked, “The consequence is that April’s uprating will be worth just a few pounds to most people. The reality is millions of families can’t afford enough food this week, or to turn the heating on as the nights get colder – emphasised by the fact that food price inflation has risen for the first time since early last year.”
“The basic rate of Universal Credit is so insufficient it fails to protect families from hardship, and this increase will barely touch the sides.”
Urgent action in the upcoming October 30 Budget to help those struggling was urged by Porter. Nevertheless, Chancellor Rachel Reeves has given prior notice that her economic plan will require “difficult decisions on spending, welfare, and tax.”
However, Labour plans to lower the amount of debt taken from benefits, with indications that deductions from Universal Credit could be limited to 15 per cent instead of the current 25 per cent.