MILLIONS of families face the equivalent of a £570 hit to their Universal Credit payments as the cost of living continues to soar.
New research from the Child Poverty Action Group (CPAG) found that with prices of things such as food and energy set to rise twice as fast as the rate of benefits, households face an effective cut to their income.
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Next month, Universal Credit and a host of other benefits will increase by 3.1%, the rate of inflation last September when the decision was made.
But inflation rose to a near 30-year high of 5.5% in January, and is expected to reach more than 7% in the coming months, leaving millions with higher bills for food, clothes and other living costs.
Rising energy costs mean bills are also on the up, and many face a planned National Insurance hike in the coming months.
According to research from the CPAG, this means the value of Universal Credit for the 3.6 million families with children who claim it will fall by around £570 a year, on average.
This is the estimated difference between the price increases households are facing, and the amount benefits are going up.
Around 180,000 families subject to the benefit cap will experience an ever greater fall in the value of their Universal Credit, the CPAG said.
What is the benefits cap?
The benefit cap restricts the amount of money some families receiving benefits get.
But the cap hasn’t increased since 2016, while the cost of living has increased by around 18% in that time, according to CPAG’s estimates.
And although single people or people without children will receive less of a hit, they will also be effectively worse off as the money they receive won’t go as far as it did a year ago.
The CPAG’s report said: “Benefits must keep pace with the rising cost of essentials – this means increasing benefits by 7% in April to match inflation.
“Anything less risks pushing those with already stretched budgets past breaking point and into debt or forced to go without.”
The government has already been forced to intervene to take the edge off the squeeze on households with a £150 council tax rebate and £200 energy loan discount.
But the CPAG also called on ministers to lift the benefit cap.
A recent study found one in three Brits fear they won’t be able to afford their current lifestyle if the cost of living continues to spiral.
The research asked 2,000 adults about the cost of living and found nearly eight in 10 (77%) were “concerned” about rising inflation and the impact on their bills and day-to-day living expenses.
What does rising inflation mean for your finances?
The rate of inflation is published each month by the Office for National Statistics (ONS), and this measures how much prices have changed on average over the past year.
The figure is usually based on how much things cost today compared to a year ago.
So as the percentage goes up month on month, it means prices are rising.
It means the money you have right now doesn’t go as far as it did, and you have to spend more, usually to get the same stuff.
If wages or benefits don’t rise at the same pace, you could be out of pocket because you are paying higher prices for goods while not earning as much to cover it.
How much Universal Credit will I get?
Universal Credit payments are made up of a standard allowance and then various additional payments that depend on your circumstances.
This is how much you will get as your standard allowance each month:
- Single, under 25 – £257.33
- Single, 25 or over – £324.84
- Couple, joint claimants both under 25 – £403.93
- Couple, joint claimants, one or both 25 or over – £509.91
These amounts are rising in April along with other benefits rates, and from then you will get the following:
- Single, under 25 – £265.31
- Single, 25 or over – £334.91
- Couple, joint claimants both under 25 – £416.45
- Couple, joint claimants, one or both 25 or over – £525.72
You have to apply as a couple if you live together – even if you are not married.
You may get additional payments, for instance if you:
- have children
- have a disability or health condition which prevents you from working
- need help paying your rent
You could also get money to help pay your housing costs. How much you are entitled to depends on your age and circumstances.
You can use a benefits calculator to see how much you’re likely to get in total.
You are assessed every month and if things change, it might affect how much you are paid for the whole assessment period.
If you start earning more from work, you’ll get a reduction in payments due to something called the taper rate.
Your payment reduces by 55p every pound above your work allowance.
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