‘Poor to suffer the most if benefits don’t go up in line with inflation’

The lowest-earning, most vulnerable families stand to lose the most from tax and benefits changes if the Government fails to raise benefits in line with inflation, according to new analysis.

The analysis by the Child Poverty Action Group and Action for Children says a family with two children earning less than £24,700 will lose out by over £600 in 2023/24 if benefits increase by earnings instead of inflation despite the NI cut.

It say that if benefits increase by earnings (5.5%) instead of last month’s inflation rate (confirmed today as 10.1%), a low-earning couple with two children stands to lose £752. Only a fraction of this will be offset by lowering National Insurance (NI), meaning parents in the lowest-paid jobs who gain the least from NI cuts will see the biggest cumulative loss.

The analysis shows that a hospital porter working full time to support a partner and two young children gains only £114 from National Insurance changes, but will lose £752 if benefits increase by earnings instead of inflation, leaving the family £637 worse off.

A hairdresser in the same situation gains just £35 from NI changes, but will lose £752 if uprating is linked to wages – leaving the family £716 worse off.

The analysis also shows that the losses to social security vary by family type, with the more needs a family has meaning they have more to lose. A working couple with two children where one partner is caring for their disabled child will lose over £1,000 if benefits are uprated by earnings instead of inflation.

The Child Poverty Action Group says these losses “risk being baked-in to future years”, for instance, even if government returns to uprating with inflation in future years, a couple with two children will continue to be £752 worse off in cash terms in each subsequent year if benefits don’t increase with inflation this year. It states that the only way to compensate for this would be if a future government raised benefits at a rate higher than inflation.

Chief Executive of Child Poverty Action Group Alison Garnham said: “The UK is already trapped in a child poverty crisis – and many more families will be pushed to the brink of survival without support. The bare minimum government can do is to confirm it will raise benefits in line with inflation. With so much uncertainty and fear, families are terrified, and it’s unthinkable that children will be forced to bear the brunt of the government’s economic mistakes.”

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