MILLIONS of Brits could see a real-terms pay cut to their benefits next year unless the government steps in.
Instead, they could go up in line with average earnings, which is a lower amount.
The current rate of inflation is 9.9% but wages are growing on average by 5.4%.
It means people on benefits would get what’s known as a real-terms pay cut.
That’s when prices are rising by more than you earn, squeezing incomes.
The Department for Work and Pensions (DWP) usually uses September’s inflation figures to make the decision on benefit uprating from the following April.
September’s rate of inflation will be revealed this month.
It’s expected the DWP will confirm how benefits will be uprated in November.
If inflation remains at 9.9% in September, benefit payments could rise by that in April 2023.
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Pensions will still rise in line with inflation after Chancellor Kwasi Kwarteng said the government is “absolutely committed” to the triple lock.
And while the government has not yet committed to uprating benefits in line with inflation, it could still do later on.
For now, the government’s lack of clarity on how benefits will be uprated has led to calls for more to be done for those on low incomes.
Cabinet member Penny Mordaunt broke ranks from the government today to say she thinks benefits should rise in line with inflation.
Meanwhile, Michael Clarke, from poverty charity Turn2Us, said the government should keep its promise to raise benefits to match inflation from next April.
“We urge the government to re-evaluate its priorities, support those of us on the lowest incomes, and uprate benefits to stop more families being dragged deeper into poverty,” he said.
The benefits that would see a real-term pay cut if they were to rise in line with average earnings and not inflation are:
- Income-based Jobseeker’s Allowance
- Income-related Employment and Support Allowance
- Income Support
- Tax Credits (Child Tax Credit and Working Tax Credit)
- Housing Benefit
- Council Tax Support
- Social Fund (Sure Start Maternity Grant, Funeral Payment, Cold Weather Payment)
- Universal Credit
- Child Benefit
You can figure out how much one of the above benefits would go up or down based on average earnings or inflation.
Those on Universal Credit can get different amounts depending on their circumstances.
If you’re single and under 25 your monthly standard allowance will be £265.31.
If that were to go up next April based on inflation, you would receive £291.57 instead.
If it were to go up based on the latest average UK wages, you would receive £279.10.
That’s a difference of £12.47 a month or £149.64 over a year.