The Work and Pensions Secretary has defended the Government’s approach to uprate benefits based on inflation data from five months ago that pre-dates the recent cost of living rises.
Therese Coffey said it was a reasonable and sensible decision to base the annual increase for inflation-linked benefits and tax credits on data from last year.
Inflation-linked benefits and tax credits will rise by 3.1% from April, in line with the Consumer Prices Index (CPI) inflation rate in September 2021.
But last week the governor of the Bank of England warned that inflation could hit 7.25% by April and is unlikely to fall back to normal levels for two years.
To some extent I think some of the energy suppliers started using billpayers as their cash flow
Ms Coffey was asked by MPs if this will leave people in an “impossible position for the next year”.
She told the Work and Pensions Committee: “We have this consistent approach using the same index year on year… inflation moves around and I think it was a reasonable approach to continue with that consistency.”
Ms Coffey also suggested energy suppliers have started using billpayers as their “cash flow”, as she recalled how her standing orders for utilities were increased.
She said: “I’ve had to go back and get them to bring back down my standing order because it’s not in line with my bills, and people can ask for that to be reviewed and they can go to Ofgem if they want to make a complaint.
“To some extent I think some of the energy suppliers started using billpayers as their cash flow.”
She added that the support package announced by Chancellor Rishi Sunak to help people through cost of living pressures is “substantial” and she is “not aware” of plans to increase it.
The Cabinet minister also branded suggestions that she is planning to resign as “ridiculous”, after being accused of being unable to answer questions put to her by committee members.
Labour MP Neil Coyle asked: “There was a rumour the Secretary of State is going to resign. Is that the reason you can’t answer any questions today, because you’ve got one foot out the door?”
Ms Coffey replied: “No, don’t be ridiculous Neil.
“If you want to bring up gossip, I could bring up other stuff that happened downstairs. I don’t think that’s appropriate for this select committee, thank-you.”
Speaking after the session, committee chairman Stephen Timms said: “The lack of detail that the Secretary of State was able to give us on what the Government is doing to support the many people currently struggling to get by was hugely disappointing.
“What is equally worrying was her admission that the cross-government group set up to address just these issues seems to have been paused at the critical moment when large numbers are facing spiralling food and energy costs.
“With a cost of living crisis looming, the committee will be writing to the DWP to seek some urgent answers on what more ministers plan to do to help those in need.”
People on low incomes are seeing incredibly high rising prices and no commensurate increase in their income
In an earlier session on Wednesday, charities shared concerns about how the poorest people will cope with rising costs while their income falls behind.
Morgan Wild, from Citizens Advice, said the “fundamental challenge is that people on low incomes are seeing incredibly high rising prices and no commensurate increase in their income”.
He said the Household Support Fund, which provides people with small grants to help with daily needs such as food, clothing and utilities, “isn’t a proper response to the rising costs that people are facing”.
He continued: “We are involved in dispersing the funds in some locations and what we’re hearing from advisers is that it’s very welcome, but they are very worried about what happens at the end of March when the Household Support Fund comes to an end.
“And in lots of situations, one adviser told me that it’s like a plaster on a gaping wound, that people who are in serious financial shortfalls – it helps them for a few weeks but does little to address the fundamental issue.”
