Prime Minister Liz Truss is facing ever-increasing pressure not to 'betray' millions of pensioners and benefit recipients by inflicting a brutal real-terms cut next April.
Former PM Boris Johnson had initially pledged that benefits would rise next year in line with inflation - a figure today confirmed as 10.1 per cent.
And The Mirror reports that while a mere matter of weeks ago, Truss was also promising the state pension would rise by the triple lock - bolstering it by the same figure, she is now thought to be looking into whether to raise both sets of payments by earnings instead - which is a marginally less 5.5 per cent.
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This would be a real-terms cut, leaving the worst-hit of Britain's 5.6million Universal Credit claimants about £1,000 a year worse off. It would also deprive pensioners - of which there are 12.3million - £443 a year if they're on the New State Pension.
Campaigners and some Tory MPs are in turn furious, with one Member of Parliament, saying: “It is like she has a zero-voters strategy” – referring to the zero-Covid approach some nations pursued in the pandemic."
Former Tory health minister Maria Caulfield, added: “I will not be voting to end the pensions triple lock,” with serving Cabinet Office Minister Brendan Clarke-Smith continuing: “The triple lock was a manifesto commitment.”
So how much would you actually be worse off if the cut goes ahead?
How much will benefits and pensions rise by in April 2023?
Normally, benefits rise every April by what inflation was the previous September - a figure today confirmed as 10.1 per cent. Likewise, the state pension rises by the triple lock - the highest of earnings, 2.5%, or inflation. That'd mean pensions rise 10.1 per cent too.
But according to reports, Liz Truss has looked at raising both benefits and the state pension by the rise in average earnings instead. It is believed if she did this, it would be a 5.5 per cent rise - the rise in average total earnings in the year to May-July 2022.
Let’s be clear - benefits would still technically rise, but the rise would be swallowed up by soaring prices, making it a cut in real-terms.
How much could Universal Credit be cut?
Raising benefits by earnings instead of inflation would take the standard allowance - the “base rate” of Universal Credit - from £525.72 to £554.63 a month for a couple over 25. While it is a cash rise, our calculations suggest that figure is £24.18 a month (£290 a year) less than it would be if it rose by inflation.
The difference in the standard allowance between an earnings and inflation rise is lower for other types of claimants. It would be £12.20 a month (£146 a year) for a single claimant under 25, £15.41 (£185 a year) for a single over-25, and £19.16 (£230 a year) for a couple both under 25.
But that's not all...
Because Universal Credit is not just the standard allowance, and people also get payments for children and disabilities. That means the average monthly payment is higher, standing at £1,065.02 for a couple with kids.
As a result, the cut is bigger too.
The Resolution Foundation think tank has worked out how much different groups will lose out each year on average if benefits rise by earnings instead of inflation. These are just averages as each family is different.
- Family with one child only receiving Child Benefit - £52
- Family with two children only receiving Child Benefit - £86
- Single unemployed adult on UC - £185
- Single disabled adult on ESA - £324
- Single disabled adult on UC - £380
- Working single parent with one child on UC - £478
- Working couple renting with two children on UC - £752
- Working couple not renting with three children on UC - £978
How much could the state pension be cut?
According to Hargreaves Lansdown, if pensions rise by earnings instead of inflation, it would take the full flat-rate New State Pension from £185.15 a week to £195.35 per week. Mirror analysis suggests that's about £8.50 a week (£443 a year) less than it would be if it rose with inflation.
The basic Old State Pension would rise from £141.85 to £149.65 per week. Mirror analysis suggests that's about £6.55 a week (£340 a year) less than it would be if it rose with inflation.
Why are people so worried?
Tory ministers will say payments are going up in cash terms and it's tough times for everyone, but we're talking about millions of Brits on a fixed income - meaning they can't cope as well with soaring prices. Two-fifths of people on Universal Credit have a job, but public sector wages are rising by much less than inflation.
Those rises will only get worse in April, when Liz Truss is removing the £2,500-a-year cap on average households' energy bills. Not only that, state pensioners are a large portion of the core Tory vote - and Liz Truss is already well behind in the polls.
Dr George Dibb, head of the Centre for Economic Justice at IPPR, said: “Today’s small rise in CPI inflation hides a much steeper rise in essentials such as food and drink where prices are now rising at over 14 per cent. This underlines the need for greater support for the most vulnerable households this winter over and above the energy price cap.
"If welfare payments, workers’ pay, or funding for public services aren't rising as fast, this represents a real terms cut. Without inflation-linked increases to these things we risk another round of austerity.”
Caroline Abrahams, Charity Director at Age UK, added: “The rising rate of inflation announced today only strengthens the case for reinstating the triple lock which, let’s not forget, was introduced to protect pensioners from the kind of hardship that many are facing now, and that even more will face over the next few months."
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