‘Families could be £720 per year worse off due to benefits not keeping up with inflation’

Around nine million households on means-tested benefits due to low incomes, both in and out of work, will experience an average real-terms cut of £500 per year because Universal Credit is not rising in line with inflation, according to a new study from the Joseph Rowntree Foundation, with families down on average £720 per year in real terms.

The Government is raising benefits by 3.1% in April, but the forecast for inflation is 7% due to rising fuel prices and other costs.

Despite temporary support measures which have been criticised as inadequate, the Foundation says families on low incomes face an average energy bill increase of £566 a year, meaning they will spend on average 16% of their incomes after housing costs on energy bills. It says government measures consisting of a council tax rebate and rebate loan then claw-back will cover only 60% of the increase for the average low-income family.

Last October, the Government cut the 20 pounds a week increase in Universal Credit, saying it was only a temporary measure during the pandemic. The Foundation says that, while working families saw some extra support through changes to the UC taper rate and work allowance, this did not fully mitigate the impact of the cut for all working families. Those out of work, including people who have lost their job, those seeking work and those who are unable to work due to sickness, disability or caring responsibilities, saw no mitigation and are £20 per week worse off following the cut.

JRF is calling on the Government to uprate benefits in line with the Bank of England’s February 2022 Monetary Policy Report forecast of 7% inflation by April as an immediate first step to help keep up with the rising cost of living. But it says this must be combined with investment in the overall adequacy of social security support, particularly for those who are not in work or are unable to work, whose support, it says, is at a 30-year real-term low.

Peter Matejic, Deputy Director of Evidence and Impact at JRF said: “At a time when the case for support could not be clearer, the Government is choosing to further erode the value of benefits that are already wholly inadequate.

“People on the lowest incomes have already experienced a decade of cuts and freezes, followed by an overnight cut of £1,000 last autumn. The decision not to uprate benefits in line with inflation represents another cut for millions of people whose incomes will now fall even further behind the cost of living.

“There can be no justification for this. Our social security system should protect people from harm, not put them in danger. The government must change course and ensure that benefit levels reflect the higher rate of inflation we are all now experiencing. There is no doubt that a failure to do so will leave more people in our society unable to meet their most basic needs.”

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