Households struggling with the rising cost of living should get an emergency boost to their Universal Credit payments of over £700 - according to a study from analytics experts.
Policy in Practice was asked to look at the costs and consequences of three options to give a much-needed lifeline to people in need by the Centre for Social Justice (CSJ). The first option being proposed would mean increasing DWP benefits as though they have been given a 10 per cent rise in April 2022, rather than the 3.1 per cent that was actually applied.
This move would cost the Government £3.1 billion and mean the 4.2 million households struggling with the cost of living crisis would gain an average of £729 a year. This is the equivalent to and extra £60 a month.
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The second option would be to restore the Universal Credit uplift when an additional £1,000 a year was given to claimants over 18 months of the pandemic. Reinstating this would cost £4.2 billion, however this has previously indicated that this was only ever a temporary measure.
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."
The third proposal is to restore work allowances to 2015 levels. This would mean that 1.66 million households in work and on Universal Credit would benefit from a policy costing £733 million, so the average gain would be £442 per year for each household in work.
A work allowance is the amount of benefit that working claimants are allowed to keep. At the moment for every £1 in wages above the level of that allowance, 55p of benefit is deducted. Work allowances only apply to those who have responsibility for a child or limited capability for work. The rate of deduction used to be 63p in the £1 but this was lowered in December 2021.
In a report, the Centre for Social Justice, a think tank founded by former Tory leader Sir Iain Duncan Smith, said: "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."
Sir Iain said rebates and discretionary funds represent "a step in the wrong direction for tackling poverty", arguing it would be better to uplift Universal Credit (UC) as it "links benefits to work". It comes after Boris Johnson said he cannot "magic away" all the soaring food and energy expenses, as he came under increasing pressure to alleviate the cost-of-living crisis.
The Government has already given many homes a £150 council tax rebate and will also take £200 off energy bills from October. However, campaigners believe this will not be enough as benefits only rose by 3.1 per cent while inflation is not at 9 per cent.
In its report, the CSJ says the 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 first increase should come at the end of June.
It has also been suggested that the Government should suspend UC debt repayments for six months and forgive historical debts that were "born of design issues in the legacy benefits system." The CSJ also wants environmental levies absorbed into general taxation, and for the energy price cap to be reviewed quarterly rather than every six months.
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.
The Treasury and the Department for Work and Pensions (DWP) have been approached for comment.
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