Families will be substantially worse off than 5 years ago if benefits rise below inflation

Struggling families would be substantially worse off than they were five years ago if benefits are not uprated with inflation, new analysis from Child Poverty Action Group (CPAG) shows.

The Government has so far not said that it will uprate benefits next April by this September’s inflation rate, as is the norm for uprating, sparking concern, including among its own MPs, that low-income families will suffer further, deep real-terms income losses.

CPAG’s analysis shows benefits would need to increase next April by 8% to keep up with prices or almost 10% to keep up with earnings.

In 2024-25 prices are expected to be 25% higher than they were in 2020 and earnings 27% higher. Right now, benefits are only 16% higher than they were in 2020. As a result, any increase to benefits less than 8% would be a real-terms cut to income for struggling families.

This comes in the context of the government having held benefit rates below inflation in nine out of the last 13 years – stripping away thousands from affected families’ budgets each year.

While much of the damage to household incomes caused by Covid and the cost-of-living crisis was mitigated by Government support measures, these were temporary – so unless benefits rise next April by at least this September’s inflation rate, millions of households will have much less money to live on than they had pre-Covid.

Commenting on CPAG’s analysis, Chief Executive of the charity Alison Garnham said:

A below-inflation increase to benefits is unthinkable. It would simply be unmanageable for millions of struggling families – many of them working – who would have less to live on compared to five years ago. For the Government to consider using the income of these families to balance their books at a time when child poverty is rising is outrageous. Ministers must allay concerns now by committing to uprating benefits by at least this September’s inflation rate.

Parents from the Changing Realities programme commenting on the possibility of below-inflation uprating of benefits said:

"If benefits do not increase in line with inflation, it would mean we will become homeless. I am already in receipt of full housing benefit and I still need to pay extra to the private landlord. I struggle to cover this and energy bills, food and necessities. It causes me anxiety on a daily basis of losing our home. We have lost 2 homes already in the last 6 years." (Bessie, Changing Realities)

"For people like us, the cost of living crisis is far from over. Just because inflation rates may have slowed slightly, this does not all of a sudden mean people who rely on in-work or out of work benefits can afford the basic costs of living… This September has hit the hardest. I have had to make cuts to what I buy in terms of school uniform, [s]eeking out last year’s tattered uniform and making do with items outgrown. The cost of childcare has increased too and that has put an enormous strain on my budget." (Aurora, Changing Realities)

Note to editors:

Benefits are usually uprated in April by the inflation rate for the previous September.

Methodology:

Benefits are based on the annual uprating of 1.7%, 0.5%, 3.1% and 10.1% in April 2020, April 2021, April 2022 and April 2023 respectively
Prices up to 2023 Q2 come from Consumer Price Index, ONS. From 2023 Q3 onwards they come from Table 1.C: The quarterly modal projection for CPI inflation, Monetary Policy Report August 2023, Bank of England
Earnings from 2019-20 to 2023-24 are taken from the July of each financial year from Total Pay, Average weekly earnings in Great Britain, seasonally adjusted, January 2000 to July 2023, Office for National Statistics. For 2024/25 they come from 2024 earnings growth figure of 3.5% from Table 1.D: Indicative projections consistent with the MPC's modal forecast, Monetary Policy Report August 2023, Bank of England
To calculate the percentage change over time you need to multiply the percentages together i.e. an 8% increase on top of 16% = 25% not 24% (1.08 x 1.16). Also rounding may affect some figures.

Child Poverty Action Group works on behalf of the more than one in four children in the UK growing up in poverty. Our vision is of a society free of child poverty, where all children can enjoy a childhood free of financial hardship and have a fair chance in life to reach their full potential. We use our understanding of what causes poverty and the impact it has on children’s lives to campaign for policies that will prevent and end poverty – for good. We provide training, advice and information to make sure hard-up families get the financial support they need.

Changing Realities is a participatory online project documenting life on a low income and pushing for change.

Media contact: Jane Ahrends 07816 909302.