10.1 per cent benefits rise due next April crucial to helping 10 million working-age families through deepening cost-of-living crisis

CPI inflation increased by 10.1 per cent in September – driven by surging food prices – which should prompt a significant increase in benefits next April that will help to support families through the ongoing cost-of-living crisis, the Resolution Foundation said today (Wednesday).

The Foundation notes that inflation in September was driven by rising food prices, which are rising at their fastest rate since 1989, and partially offset by falling petrol prices (which have since stabilised). While producer price inflation (PPI) for goods is falling, the acceleration of services PPI (from 5.4 to 6.6 per cent) is a concern as these price pressures do not look related to rising energy costs, and may instead reflect more persistent inflation.

Today’s inflation data is important as it would ordinarily be used to uprate benefits and state pensions next April. Doing so is particularly crucial in the context of the ongoing cost-of-living crisis, with household income set to fall fast again next year even with higher benefit support.

The Foundation notes that existing energy bills support – including lump sum payments, the £400 energy bills rebate and the Energy Price Guarantee – is all due to expire next April at a time when energy bills could effectively double to around £4,000, and pay packets will still be shrinking. In these tough times, millions of families will need a stronger safety net to help them through.

However, the Government is reportedly considering uprating benefits by earnings rather than prices (a 5.5 per cent rise, compared to 10.1 per cent) as a way to cut public spending.

The Foundation notes that this would save £5.6 billion next year if applied to pensioner benefits (State Pension and Pension Credit) and a further £2.4 billion if applied to ‘unprotected’ working-age benefits (including Universal Credit but excluding Disability Living Allowance and Personal Independence Payments).

The cost of this uprating cut to families would be stark. A single disabled adult on Universal Credit would lose £380, while a working single parent with one child would lose £478, and a working couple with three children would lose £978.

Jack Leslie, Senior Economist at the Resolution Foundation, said:

“Surging food prices have driven a return to double-digit inflation across Britain and high inflation looks set to stay with us for some time too, with accelerating services producer price inflation and the early end of the Energy Price Guarantee likely to put upward pressure on consumer prices next year.

“This bleak outlook means that family incomes will continue to fall sharply again next year, especially as support with energy bills is withdrawn.

“That is the context of debates within Government about whether previous commitments to uprate benefits or pensions in line with prices should be the next U-turn to be announced. While the significant Treasury savings may look tempting in the context of its attempts to fill its fiscal hole, the cost to ten million working age families and almost every pensioner would be huge amid the deepest cost of living crisis for half a century.”