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Social Justice

Will benefits rise in line with inflation?

Experts have more warned that even raising benefits in line with inflation will not be enough to support vulnerable people

Jeremy Hunt has given his Autumn Statement to address the cost of living crisis and steeply rising inflation, promising to increase benefits by 10 per cent in April 2023, in line with the average rate of inflation.

It was a core promise of Prime Minister Rishi Sunak’s campaign to be Conservative Party leader over the summer, a contest he lost to Liz Truss. But two months after Truss’s disastrous spell in charge, which deepened the UK’s economic crisis even further, Chancellor Jeremy Hunt has promised benefits and pensions will rise.

While the increase keeps pace with the average rate of inflation, it does not make up for the price rises many on benefits have seen over the last year.

Anastasia Berry, policy co-chair of the Disability Benefits Consortium, said: “Disabled people face higher costs than the general population, as they may need to power vital medical equipment or keep the heating on to maintain circulation.

“But with inflation at 11 per cent, many disabled people are facing a long bleak winter, and help cannot wait. Right now, some are unable to afford food, heating and medication. The government must bring this support package forward, to help those who are already at breaking point.”

While today’s announcement may provide reassurance, she added, “ it cannot distract us from the fact that benefits were inadequate long before the cost of living crisis began”.

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“The bottom line is that disabled people have been hanging on by a thread for years, punished by over a decade of government cuts. In the longer term, benefits must be increased significantly to ensure that all disabled people can cover the extra costs of their condition, and live full independent lives rather than surviving at breaking point.” 

On Wednesday morning, the Office for National Statistics (ONS) revealed inflation has hit the highest levels seen in 41 years. It has now reached 11.1 per cent, and inflation is hitting the poorest families hardest. 

Prices for food and non-alcohol drinks were up by nearly 17 per cent compared to the same time last year and household bills were up by more than 25 per cent, forcing many on benefits to make impossible choices between heating and eating. While the 10 per cent increase will help households, it does not fill the income gap many are experiencing.

The change is expected to come into play in Aprail 2023, when Hunt also promised households on means-tested benefits would receive a £900 support payment and the energy price cap would increase to £3,000.

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Charities and campaigners have long called for benefits to be increased in line with inflation. Neil Cowan, of the Poverty Alliance, told the Big Issue in September that a real-terms cut to benefits would be a “shameful moral failure and a disgraceful failure of compassion”.

But experts have more recently warned that even raising benefits in line with inflation will not be enough to support vulnerable people. Low-income families are facing higher inflation rates than the rest of the population due to soaring costs of food and energy, according to the ONS. 

In the year up to October 2022, inflation averaged at 11.9 per cent for low-income households and at 10.5 per cent for high-income households – averaging out at 11.1 per cent. The costs of essentials are soaring at higher rates, and low-income families typically spend a greater proportion on these items. 

Heidi Karjalainen, a research economist at IFS, explained before the budget that increasing benefits in line with inflation would still leave their real value on course to be 6 per cent below their pre-pandemic levels. 

That’s equivalent to almost £500 per year for the average out-of-work claimant – and this assumes that benefit recipients will continue to receive equivalent support for rising energy bills as they do under the energy price guarantee.

“This is a consequence of below-inflation increases in April this year,” Karjalainen said, “when benefit rates failed to keep pace with an accelerating rate of inflation. 

“The situation for benefit recipients’ living standards next April could be even more difficult depending on the design of the energy support package in place from next April.”

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Rachelle Earwaker, senior economist for the Joseph Rowntree Foundation, said: “When the government sets out its plans tomorrow, benefits must at least be increased in line with inflation as usual, as was promised when Rishi Sunak was chancellor. 

“As well as upholding that pledge, the uprating should be brought forward rather than expecting people to struggle on until April before their income reaches anything approaching the soaring cost of food.”

Sunak said pensioners “will always be at the forefront of my mind” when speaking to reporters on the way to the G20 summit, but he has not yet confirmed whether the government will protect the triple lock on pensions. 

The triple lock rule means pensions rise with whichever is highest: inflation, average earnings, or 2.5 per cent. It was suspended earlier this year due to the economic impact of the pandemic, and pensions and benefits rose by 3.1 per cent.

“We will put fairness and compassion at the heart of all the decisions we make and I am confident people will see that [on] Thursday,” Sunak said. “Fairness and compassion will be at the heart everything we do.”

Big Issue Group’s #BigFutures is calling for investment in decent and affordable housing, ending the low wage economy, and millions of green jobs. The last 10 years of austerity and cuts to public services have failed to deliver better living standards for people in this country. Sign the open letter and demand a better future. 

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