Benefit claimants in Derby are among millions of people in the UK set to see their payments rise in 2023. This comes as the general cost of living continues to increase for millions of households across the country.
Inflation is also expected to rise, but Government support is only expected to rise by 3.1 percent in April, based on September’s inflation figure. But since that point, inflation increased to 6.2 percent in February this year and that is expected to rise further.
The Office for Budget Responsibility suggests that the Consumer Price Index could shoot up to a 40-year high of 8.7 percent in the final three months of 2022. This is down mainly to the war in Ukraine and rising energy costs.
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The Bank of England has gone even further to suggest inflation could hit 10 percent if the energy price cap goes up again in October. Whilst the increase in the cost of living is bad news for some, this means that Government payouts will also increase for those currently in receipt. For the 2022/2023 financial year, all benefits are going up by 3.1 percent in line with a decision to increase the State Pension by that amount.
Pension rises are normally based on a triple lock that sees them go up by whichever is the highest of inflation, average wage increases or 2.5 percent. But with the jump in wages at the end of the furlough scheme, this would have been the overriding factor of the three and led to pensions going up by 8 percent, Birmingham Live reports.
The Department for Work and Pensions announced last September it would set the wages element aside, and instead use the inflation figure of 3.1 percent at that time. Work and Pensions Secretary Therese Coffey has pledged that the triple lock will be reinstated for the following year – with soaring inflation suggesting payment increases of eight to 10 percent for 2023/2024.
If an eight percent rise is applied, pensions will go up by £770 over the year. All other benefits would then get the same percentage increase. This was confirmed by Treasury minister Simon Clarke who has told MPs that high inflation “will be reflected” in the uprating figures for April 2023 if the current forecasts come to fruition.
Mr Clarke, opening the debate on the National Insurance Contributions (Increase of Thresholds) Bill, told the House of Commons: “The United Kingdom spends £243 billion a year on our wider welfare spend, including pensions. This is a country where we do do a huge amount to make sure that everyone is supported.
“We have to consider all our decisions in the context of both wider affordability and also how the system operates. The welfare system always operates on the basis of an uprating in September for changes in the ensuing April.
“If there is high inflation, as is forecast, during the course of 2022 that will be reflected in the uprating figures for April 2023 and the triple lock will be in place to protect families.”
He later confirmed: “Insofar as the forecasts of very high inflation for this year do indeed come to pass that will be captured in the uprating figures that will be delivered this autumn for 2023 benefit uprating.”
The Bill implements a policy announced by Chancellor Rishi Sunak in his spring statement to raise the threshold at which people pay national insurance. NI thresholds where it starts to be applied will rise from £9,880 to £12,570 from July, aligning income tax and NI in a tax cut worth more than £6 billion, according to the Treasury.
The Government believes it will benefit almost 30 million UK workers and save the typical employee more than £330 in the year from July.
Labour’s Stephen Timms, who chairs the Work and Pensions Committee, highlighted concerns that Universal Credit claimants will lose 55 percent of the £330 tax cut “due to a reduced Universal Credit award”.
Shadow Treasury minister James Murray said the Bill has more to do with the Chancellor wanting to portray himself as a hero who cuts taxes.
He said: “We will support today’s Bill as any help for people facing the Chancellor’s national insurance tax hike in April is something we welcome. There are benefits to raising the threshold at which people begin to pay national insurance.
“But we should be conscious that this Bill has more to do with the Chancellor’s increasingly desperate desire to paint himself as a tax cutter than it does with a well thought through package of measures to help people with the struggles they face. Even after this Bill passes, the truth is the tax burden in our country will still be at its highest in 70 years.”
The Bill received an unopposed third reading and will undergo further scrutiny in the Lords at a later date.
The DWP’s largest payout is the State Pension, with 12.5 million recipients. It’s known as a contributory benefit, because the amount is based on a person’s National Insurance contributions – other such benefits are New Style Jobseeker’s Allowance (JSA), New Style Employment Support Allowance (ESA) and Bereavement Support Payment.
Some benefits are means-tested, meaning they are based on a person’s income and savings. The biggest of these is Universal Credit which has 5.6 million claimants according to the latest figures and is the second biggest DWP payout after State Pension. Around 40 per cent of those on Universal Credit are working and claim the benefit to top up low wages.
Other means-tested benefits are income-based Jobseeker’s Allowance, income-related Employment and Support Allowance, Income Support, Housing Benefit, Tax Credits (from HMRC) and Pension Credit.
And then there are the disability benefits Personal Independence Payment (PIP) and Disability Living Allowance (DLA), both determined by a person’s need for extra help to deal with long-term health issues and not based on their means or National Insurance contributions. Nearly 2.8 million people are on PIP and a further 1.3 million on DLA.