Universal Credit claimants face a £670 income drop from April 2024 despite the annual rise in benefits, because cost of living payments will have ended (Image: Getty Images)

DWP Universal Credit claimants will be up to £670 worse off from April despite benefit rise

The end of the cost of living payments will leave people having to manage on less - while others will see their income hit by the benefit cap

by · Birmingham Live

People on Universal Credit could end up as much as £670 worse off next year despite a benefits increase. The end of the cost of living payments after the final one due in February will leave people having to manage on less, analysts have warned, while others will see their income hit by the benefit cap.

The Department for Work and Pensions is to increase benefits by 6.7 per cent, in line with September inflation, with the Universal Credit standard allowance going up to £311.68 a month for a single person under 25, £393.45 for a single person aged 25 and over, £489.23 for a couple where both are under 25 and £617.60 for a couple where both are aged 25 or over. Additional amounts can be paid on top for children, limited capability for work, childcare and caring responsibilities.

Those on means-tested benefits including Universal Credit have received cost of living payments worth £650 in 2022-2023 and will have received cost of living payments totalling £900 by the end of the 2023-2024 financial year, with the final instalment of £299 due in February. But when that all comes to an end, households will be hit by a sharp income drop, the New Economics Foundation warned.

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The foundation said support for an out-of-work single person over 25 on Universal Credit would reduce by £670 a year in April 2024 compared with April 2023. For a lone parent with one child the cut amounts to £350, while a couple over 25 with two children will see their benefit income increase by just £35 a year, it calculated.

Any increase to benefits via the annual uprating will be offset by the ending of the cost of living payments, the think tank said. Its analysis also revealed that 40 per cent of all families will be unable to afford the cost of living by April 2024. This is the same rate as April 2023, but is a 10 percentage point increase since April 2019, indicating that the cost of living crisis is set to stay, even if inflation falls closer to the Bank of England's 2 per cent target. It's currently at 3.9 per cent.

This calculation is based on a comparison to the Minimum Income Standard (MIS) after housing and childcare costs. The MIS calculates what people need to meet a decent standard of living and is developed in consultation with members of the public. For the poorest quarter of households, the shortfall between income and the cost of living will increase by £430 a year.

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Sam Tims, senior economist at the New Economics Foundation said: "The social security system should provide a safety net for us all but Universal Credit is leaving people without enough to afford the essentials like food and clothes. Raising benefits in line with inflation should be a guaranteed bare minimum, but in practice all it means is that rates are returned to an inadequate baseline that does not reflect the actual costs people face.

"If the Government proceeds with cutting the cost of living payments, low-income households will fall even further behind. The Government must commit to ensuring that, at the very least, benefits cover people’s essential costs."

The Child Poverty Action Group says that the 6.7 per cent rise in benefit rates and support with rent costs will make a difference to many families continuing to struggle with rising prices but will provide "absolutely no help to the more than 85,000 households affected by the benefit cap, who will receive not one penny more."

In a statement, CPAG said: "The benefit cap severs the link between need and entitlement in our social security system: a household will have their total need for support assessed, and if this comes out above the level of the cap (currently £22,020 per year for families with children, or £25,323 for families in London) they will simply receive less than they need. There are wide variations in the amounts that households are capped, but the average is £53 a week, a loss keenly felt by those already struggling to survive below the poverty line."

The benefit cap - a limit on the state support that working-age households can receive - is to stay at the same level from April 2024, meaning that some of those whose payments go up with the annual benefits rise will then find they are above the threshold, with the excess amount deducted and leaving their income at the same level as before.

MPs and campaigners have said a bigger benefit boost would be better than cost of living payments. The Government's Work and Pensions Committe said in its November report: "It is clear that an uplift of regular working age benefits received would be more beneficial than ad-hoc cost of living support payments as it would better enable households to budget and reduce the chance of a recipient losing out on a major one-off payment.

"The Government has explained it is not possible to quickly uprate legacy benefits; however it can quickly uprate Universal Credit. If this can be done, and should further cost of living payments be required next year or in the future, the Government should uprate Universal Credit and only maintain the one-off payments system for those on legacy benefits."

A Department for Work and Pensions spokesperson said: "The cost of living payments have provided a significant financial boost to millions of households – just one part of the record £94 billion support package we have provided to help with the rising cost of bills.

"This includes a 10.1 per cent rise to benefits earlier this year, and we’re investing £3.5 billion to help thousands into jobs – the best way to secure their financial security in the long-term. Ultimately, the best way we can help families is to reduce inflation, and we’re sticking to our plan to halve it this year, taking the long-term decisions that will secure the country’s financial future."

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