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Highlights:
- Lower Benefit Increase: A 1.7% increase in benefits due to lower inflation will result in a modest £253 rise for families receiving Universal Credit in 2024.
- Inflation Rebound: October inflation is expected to rise, meaning families could have received a higher £327 benefit increase if calculated later.
- Call for Reform: Economists urge the government to address the growing disparity between working-age benefits and rising wages, as support lags behind increasing living costs.
A recent three-year low in inflation may offer some relief to the government’s borrowing strain in the upcoming Budget, as it will lead to a smaller increase in state benefits for working-age families. The inflation rate from September, which is traditionally used to calculate benefit increases for the following spring, will result in a modest rise of 1.7% in 2024.
Impact on Universal Credit Benefits
According to the Resolution Foundation, this lower inflation rate translates to a £253 annual increase for families receiving Universal Credit. While the reduction in inflation is typically seen as positive, it comes at a less-than-ideal time for families relying on benefits to cope with rising costs.
Expert Insights on Benefit Increases
Lalitha Try, an economist at the Resolution Foundation, pointed out that the recent fall in inflation is expected to be short-lived, with inflation likely to rise sharply in October due to base effects from last year’s drop in energy prices. While this temporary dip will result in a smaller increase in benefits, families could have seen a higher rise of £327 instead if the October inflation rate were used for the calculation.
Try emphasized the need for the government to address the growing age divide in benefits, noting that working-age support has lagged behind rising wages and living costs, further disadvantaging families that depend on these benefits.
Long-Term Outlook and Policy Considerations
As inflation is expected to rebound in the coming months, many families could face financial pressure until benefits catch up with the changing cost of living. Economists are urging the government to consider reforms in the upcoming Budget that can offer more substantial support to low- and middle-income families, particularly those affected by the widening gap between benefits and living standards.
With inflation set to increase, the upcoming Budget will be closely watched to see how the government addresses the financial pressures faced by millions of families across the UK.
