Some of the UK's poorest families could be £1,000 worse off if the usual benefits increase is watered down, a think tank has calculated.
Abandoning the usual inflation-rate rise for benefits in April in favour of level of earnings growth will cost a single adult £391 next year in real terms, analysis by the Resolution Foundation has found. And families with children will be even worse off, with a single parent with one child losing £607 and a working family with two children potentially getting £1,061 a year less.
Charities have hit out at the potential loss in income for vulnerable families, which they say could be catastrophic to families already struggling to cope with spiralling bills and the cost of living crisis.
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Normally Universal Credit and many other benefits go up every April in line with inflation for the year to the previous September. September's inflation figures will be released on October 19, but inflation was 9.9% in August, raising hopes that benefits claimants could get around 10% more in benefits next year.
But fears started to grow when Chancellor Kwasi Kwarteng and Chris Philp, Chief Secretary to the Treasury, refused to be drawn on whether benefits would be boosted to meet inflation. Chancellor Kwasi Kwarteng and Chris Philp, Chief Secretary to the Treasury, refused to comment on whether benefits would be boosted to meet inflation.
Newcastle Citizens Advice has previously called for benefits to keep pace with inflation. "There is a disconnect between benefit income rates and household expenses," a spokesperson said. "The fact that benefit levels are not keeping up with rising inflation means a cut to incomes in real terms. Benefits must keep pace with essential costs. Last year the £20 Universal Credit uplift was ended, which affected 31,000 households in Newcastle alone and a lot of these families have never recovered from the loss of that money. Those on the lowest incomes will be hit hardest and frontline advisers are already supporting people who can’t afford rent, food or heating."
Amanda Bailey, director of the North East Child Poverty Commission, has also sounded an alarm, saying: "Many thousands of families across our region are facing a growing gap between what they have and what they need to get by, with parents and carers facing absolutely impossible decisions each day about what more they can cut back on. Already high levels of hardship for children and young people across the North East are going to get much worse unless the Government acts urgently to ensure social security support keeps pace with inflation – the bare minimum required to give local families a chance of keeping their heads above water”.
Mental health charity Mind also expressed concern over the possible Government U-turn. “Any move by UK Government to inflict a brutal cut in practice to the incomes of people who receive benefits during the worst cost of living crisis in a generation would simply be cruel,” Vicki Nash, Mind’s associate director of policy, campaigns and public affairs told The Mirror. “It would plunge thousands of people, many of whom have mental health problems, into financial chaos.”
This year, benefits were increased by only 3.1%, and Prime Minister Liz Truss is facing Tory revolt, with leader of the House of Commons Penny Mordaunt warning she must not 'help people with one hand and take away with another'
"I have always supported, whether it's pensions, whether it's our welfare system, keeping pace with inflation. It makes sense to do so. That's what I voted for before and so have a lot of my colleagues," said Ms Mordaunt.
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