Households unable to afford their day-to-day living costs could be given an emergency Universal Credit boost worth over £700 as part of a new emergency lifeline that has been proposed.
Millions of families across Scotland and the UK are struggling amid the worsening cost of living crisis, with the energy price cap set to soar again in October to £2,800.
The Centre for Social Justice (CSJ) commissioned social policy software and analytics company Policy in Practice to investigate the costs and consequences of three options to give Universal Credit a much-needed increase.
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As reported by Chronicle Live, the first of these options would involve upping DWP benefits as though they had been given a 10% rise in April 2022, rather than the 3.1% that was applied at the time.
This would cost the UK Government approximately £3.1 billion and would result in around 4.2 million households gaining on average £729 per year — or £60 a month.
According to the CSJ, the second alternative would be to reinstate the Universal Credit uplift, which saw an extra £1,000 being given to claimants across 18 months of the pandemic — this would cost approximately £4.2 billion.
The UK Government has stated that the uplift was only a temporary measure, however.
The CSJ acknowledges that the £729 rise may be seen as preferable, as "this lowers the cost to the Treasury, if this is a concern - it is a sensible alternative to restoring the £20 uplift."
According to the CSJ, the third option option would be to restore work allowances to the levels they were at in 2015, meaning 1.66 million households in work and on Universal Credit would benefit from a policy costing £733 million.
The average gain for a household in work would be £442 each year.
The work allowance refers to the amount of money received from benefits that claimants in work are permitted to keep.
For every £1 in wages above the work allowance, 55p is deducted.
You will be eligible for a work allowance if you or your partner either have responsibility for a child or limited capability for work.
The CSJ stated in a reported: "While the decision to cut the UC taper in the Autumn Budget put £1,000 back into the pockets of 1.9 million households, much of its value will be wiped out by inflation. And it will do nothing to protect those who are not in work.
"With UC only uprated by 3.1 per cent in April, those who rely on welfare for their income will experience a 7 per cent cut. To prevent this, the Chancellor and Secretary of State for Work and Pensions should implement an emergency in-year uprating, bringing UC into line with inflation to ensure it covers the true cost of living."
Founder of the CSJ Sir Iain Duncan Smith stated that rebates and discretionary funds are a "step in the wrong direction for tackling poverty", and argued that uplifting Universal Credit would be a better alternative due to the fact that it "links benefits to work".
It follows the news that Boris Johnson said that he could not "magic away" the cost of living crisis, after being put under increasing pressure to alleviate the impact for households across the UK.
While the UK Government has previously announced £150 council tax rebates and a £200 reduction on their energy bills in October, campaigners have warned that this will not be sufficient for many people because benefits rose by 3.1% but inflation is now at 9%.
In its report, the CSJ stated that the UK Government should consider reviewing the rate of benefits quarterly, rather than annually, at least as long as the "current period of unusual inflationary pressure" lasts. The think tank says the first increase should come at the end of June.
The CSJ also wants the Government to suspend UC debt repayments for six months and forgive historical debts "born of design issues in the legacy benefits system". In addition, environmental levies should be absorbed into general taxation, and the energy price cap should be reviewed quarterly rather than every six months "to avoid cliff-edges in prices", it said.
Last week, Chancellor Rishi Sunak said he was not able to raise payments by more than 3.1 per cent due to an old computer system that the Department for Work and Pensions uses. The Institute for Fiscal Studies economic think tank has suggested the poorest households might be facing inflation of 10.9 per cent - this is higher than average because they spend a larger portion of their money on heating and lighting their homes.
Chronicle Live have approached the Treasury and the Department for Work and Pensions (DWP) for comment.
