People on universal credit could be as much as £670 worse off in April 2024, even if rates are increased in line with inflation

People on universal credit could be as much as £670 worse off in April 2024, even if rates rise in line with inflation, according to new analysis from the New Economics Foundation.

Support for an out-of-work single person over 25 on universal credit would reduce by £670 a year in April 2024 compared with April 2023 even if benefits are uprated in line with inflation. For a lone parent with one child the cut amounts to £350, while a couple over 25 with 2 children will see their benefit income increase by just £35 a year. (Fig. 1)

Traditionally, the government increases benefit payments in line with September inflation rates, this would amount to a 6.7% increase. However, any increase to benefits via uprating will be offset by the ending of the cost of living payments, originally introduced in 2022.

The analysis also reveals that 40% of all families will be unable to afford the cost of living by April 2024. This is the same rate as April 2023, but is a 10 percentage point increase since April 2019, showing the cost of living crisis is set to stay, even if inflation falls closer to the Bank of England’s 2% target.

This calculation is based on a comparison to the Minimum Income Standard (MIS) after housing and childcare costs. The MIS calculates what people need to meet a decent standard of living and is developed in consultation with members of the public.

For the poorest quarter of households the shortfall between income and the cost of living will increase by £430 a year. This is assuming the government increases benefits in line with inflation and that the cost of living payments are scrapped. The government has so far failed to confirm whether they will be extended into the next financial year.

Sam Tims, senior economist at the New Economics Foundation said:

“The social security system should provide a safety net for us all but universal credit is leaving people without enough to afford the essentials like food and clothes. Raising benefits in line with inflation should be a guaranteed bare minimum, but in practice all it means is that rates are returned to an inadequate baseline that does not reflect the actual costs people face. If the government proceeds with cutting the cost of living payments, low income households will fall even further behind. The government must commit to ensuring that, at the very least, benefits cover people’s essential costs.”

Notes
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