Chancellor under fire for failing to top up benefits in line with inflation

·6-min read

The Chancellor is accused of being “woefully out of touch with the reality facing millions of families” after he failed to announce an uprating of benefits in his spring statement.

Paul Johnson, director of the Institute for Fiscal Studies (IFS), said in the wake of Rishi Sunak’s address to the Commons on Wednesday that “what really stands out today is what was missing”, with no move to top up benefits in line with fresh sky-high inflation forecasts.

The Chancellor told MPs that he would double the Household Support Fund to £1 billion “to do more to help our most vulnerable households with rising costs”.

Local authorities would receive the funding from April, he said.

But Mr Johnson said there was “no new help for those dependent on benefits in today’s statement”.

“Perhaps what really stands out today is what was missing,” he said.

“In the face of what the OBR (Office for Budget Responsibility) calls the biggest hit to household finances since comparable records began in 1956/57, he has done nothing more for those dependent on benefits, the very poorest, besides a small amount of extra cash for local authorities to dispense at their discretion.

“Their benefits will rise by just 3.1% for the coming financial year. Their cost of living could well rise by 10%.”

PA infographic showing UK annual inflation rate
(PA Graphics)

It had been suggested the Chancellor could uprate benefits to put more money in the pockets of low and middle-income households.

The payments are set to rise by 3.1% in 2022/23, in line with the Consumer Prices Index (CPI) rate of inflation in the year to September 2021.

Mr Sunak had faced calls to increase this uplift by five percentage points to keep pace with the mounting cost of living.

Inflation has surged in recent months, and is now predicted to average 7.4% this year and peak at 8.7% in the fourth quarter – the highest level since the oil shock of the late 1970s and early 1980s.

But think tanks, charities and MPs have pointed out that a boost to benefits was conspicuously absent from Mr Sunak’s plans.

Mr Johnson tweeted on Wednesday: “The big omission from this statement was anything for those subsisting on means-tested benefits.

“They will be facing cost-of-living increases of probably 10% but their benefits will rise by just 3.1%.

“And (it is a) cut compared to last year if you account for withdrawal of £20 (Universal Credit) uplift.”

Meanwhile, the Institute for Public Policy Research (IPPR), warned that Mr Sunak’s failure to raise benefits in line with new inflation forecasts would mean millions of families were pulled into hardship.

Carys Roberts, IPPR executive director, said: “We’re going into the biggest incomes squeeze in a generation and yet the Chancellor hasn’t offered the help that many households need.

“His plan is woefully out of touch with the reality facing millions of families, who face being pulled into poverty and debt.

“To prevent the cost-of-living crisis becoming a living standards catastrophe, the Chancellor needed to find ways to get targeted support to those with the greatest need, but he has sadly failed to ‘do what it takes’.”

Oxfam’s domestic poverty lead Silvia Galandini said Wednesday’s pledges would “do little to help millions of low-income families who were looking to the Chancellor for urgent support”.

And Anastasia Berry, from the Disability Benefits Consortium, described the absence of an uplift as a “real-terms benefits cut”.

“Talking about a cost-of-living crisis while pushing through a real-terms benefits cut is like telling someone about a storm while drilling a hole in their boat,” she said.

“The Government must increase benefits levels in line with inflation, or disabled people’s health will suffer even more.”

Sara Ogilvie, policy director of the Child Poverty Action Group, said the Chancellor “should have increased benefits to match inflation”, which she said would be “the most efficient way to help hard-pressed households”.

“Government needs to do more to show it understands the reality of life for parents and children across the UK,” she said.

“Anything less than urgent action on benefits and we’ll have more parents in debt, more hunger, more children without essentials. But for today, the Government looks increasingly remote from real-life families.”

Responding to Mr Sunak’s statement on Wednesday, Labour former shadow chancellor John McDonnell said he was “desperately worried” about people in his constituency forced to live on benefits.

The MP for Hayes and Harlington said: “Can we be absolutely clear that benefits and pensions are still going to rise by only 3.1% whilst inflation is predicted to be between 7% and 10%, that’s a cut for some of the poorest in our society.”

Labour former minister Stephen Timms also questioned the Chancellor’s decision to increase the size of the Household Support Fund, instead of boosting benefits in line with inflation.

And Conservative MP Peter Aldous urged Mr Sunak to “look very closely at the levels of and the means of uprating Universal Credit and other benefits”.

The Chancellor replied to Mr Aldous: “I strongly believe the best way to help people sustainably is to move them off welfare and into work, that is what this Government is doing.

“Our record on doing so is incredibly strong and we are throwing literally the kitchen sink both in terms of money and policies … to support people as they make that transition and put more money in their pockets.”

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