THE Department for Work and Pensions (DWP) has hinted that benefit payments face a real terms pay cut in the Autumn Statement.
Benefit payments usually rise in line with September’s inflation figures from the following April.
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The UK’s rate of inflation stood at 6.7% in September, but there are fears that the government will instead opt to use a lower inflationary figure to uprate welfare payments.
The exact rate at which benefits rise each April is usually confirmed by the chancellor when he delivers his Autumn Statement.
However, the DWP has issued a notice that states that it will release an “ad-hoc” document confirming the April 2024 uprating on Wednesday.
The department usually publishes this document as soon as any Autumn Statement has been delivered and hasn’t, in the past, given prior notice about its publication as it has done today.
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It reads: “Advance notice that an ad hoc statistical release called ‘Benefit uprating – estimated number and type of families and individuals in families benefitting from the uprating of benefits in 2024 to 2025’ will be published on November 22 2023.”
This unconventional move signals that the government could forfeit using September’s inflation figure and instead use a lower CPI rate when upping benefit payments next April.
The DWP declined to comment.
If incomes don’t rise at the same rate as prices it leaves people worse off and is a pay cut in real terms.
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Steve Webb, former pensions minister and partner at LCP said: “This hints at a benefit cut.
“In normal years where the DWP simply uprates benefits with September’s inflation figure, they don’t issue upcoming ‘ad hoc’ publication details.
“So this looks like this will be their defensive document, justifying using a more recent inflation figure which would result in a real-term pay cut for millions.
“Fiddling the figures to use a lower inflation rate would lead to a further squeeze on millions of families who are still dealing with the impact of the cost of living crisis.”
Reports have suggested that the government may instead use October’s inflation figure to uprate benefits in the spring.
This would mean that Universal Credit payments could rise by 4.6% instead of 6.7%.
Using the October inflation rate would cut working-age benefits spending by about £3 billion in 2024–25, according to research by the Institute for Fiscal Studies (IFS).
The move would affect just under nine million UK households.
For Universal Credit claimants receiving the standard allowance and under the age of 25 – a rise of 4.6% would see payments rise from £292.11 a week to £305.55 a week.
This would see payments across the year increase to £3666.56 – up from £3505.32.
But it would represent a £73.58 real terms pay cut across the year compared to if benefits were to rise in line with the September 6.7% inflation figure as usual.
Sam Ray-Chaudhuri, research economist at IFS, said: “Using the October rather than September inflation rate to uprate benefits would save the government money, by cutting incomes for millions of low-income working-age people.
“Importantly, both effects would be permanent, whether or not the move to basing annual benefit increases on the October inflation rate were to be retained in subsequent years.
“This implies that real benefit levels would not just take several years to regain their pre-pandemic values, due to the rather arcane lagged method for increasing them – they would never get back to where they were, without subsequent changes in policy.”
Ahead of the Autumn Statement, organisations representing children’s doctors, school leaders and social workers have joined Child Poverty Action Group in calling on the Chancellor to uprate benefits from April at least in line with September’s inflation rate as usual.
In an open letter to the Chancellor, the organisations warn that uprating by less than September’s CPI would mean an “unmanageable” real-terms income cut for many of the low-income families they work with, compromising children’s welfare.
The exact amount that benefits payments will rise by will be confirmed by Chancellor Jeremey Hunt when he delivers his Autumn Statement on Wednesday, November 22.
