200,000 more children in poverty if benefits rise by wages rather than inflation

Two hundred thousand more children will be pushed into poverty if benefits are uprated by wages rather than inflation, new analysis from Child Poverty Action Group (CPAG) finds. Almost all these children will be in families where at least one parent is working.

CPAG’s analysis also shows that the average increase in prices for 2023/24 compared to 2021/22 is 16% for all households but the inflation rate for low-income families – who must spend a much higher proportion of their income on ever more expensive essentials like energy and food – is 19%. 

If benefits only go up with earnings next year, they will have only risen by 9% (3.1% and 5.4%) since 2021/22. This means that low-income households will receive 10% less in social security in real terms than they did two years ago (and even less if the £20 universal credit uplift is taken into account). Most of these households are working households who will also lose out from earnings going up by less than inflation. Households who are unable to work, due to caring for young children, disabilities or being in between jobs, would be pushed even deeper into poverty. The 10% cut would be the biggest two-year reduction in social security ever – at a time when families are in desperate need of more support.

The prime minister has so far refused to confirm that she will honour the former chancellor’s pledge to increase benefits to match inflation, which is currently running at 10%. 

Commenting on CPAG’s findings, chief executive of the charity Alison Garnham said:

The UK already faces a child poverty catastrophe, and government will ruin the lives of many more children unless it takes action. Struggling parents need reassurance now that their children are not on the list for efficiency savings. The Chancellor must honour the promise to uprate benefits in line with inflation. U-turning on children’s futures cannot be an option.

Low-income parents have told CPAG:

I will have to cut back on everything, I only get £560/month and already I’m paying £250 gas and electric.” (family are in temporary accommodation and on a pre-payment metre)

I wake up every morning worrying about where the money is coming from to pay the next gas/electricity bill. I understand that children need to be taught the word no!! But I am having to tell them no all the time to even the smallest thing like a tub of ice cream to share for desert, my mental health is really suffering from the constant worry on where the next money is coming from just to survive.

We haven’t been able to afford to get them new winter coats or hats/socks/trousers/jumpers for the winter season yet. We will need to revisit nursery attendance if the bill becomes unpayable.

Notes to editors:

CPAG press office: 07816 909302.

Spokespeople available.

The poverty results presented here are based on UKMOD version A3.5+. UKMOD is maintained, developed and managed by the Centre for Microsimulation and Policy Analysis (CeMPA) at the University of Essex. The process of extending and updating UKMOD is financially supported by the Nuffield Foundation (2018-2021). The results and their interpretation are the author’s sole responsibility. Calculations are for financial year 2023/24 and the poverty measure used is relative after housing costs (AHC). The estimated increase in benefits by wages is 5.4% (August 2022 earnings growth) and the increase in September CPI inflation by 10.2% (estimated small rise from August 2022 CPI figure of 9.9%).

The inflation figures are author’s calculation from ONS CPI inflation and Bank of England forecasts of inflation adjusted to account for the price cap announcement. The inflation rate for low-income households is calculated by using the lowest quintile weights calculated from Source: Table 3.1E5, Detailed household expenditure by disposable equivalised income quintile group (OECD-modified scale), UK 2020/21.