Increasing benefits in line with inflation is just the first step

As inflation has rocketed to record highs, so has the number of people coming to us for crisis support. The number of people we’ve helped with crisis support this year has increased by 54% on the same time last year, and is 126% higher than the year before.

Our local Citizens Advice are supporting people in impossible situations. Like Nicole* who had to heat her baby’s milk at the GP surgery because she couldn’t afford to top up her prepayment meter. We’ve also seen alarming signs of rising debt. For the first time ever, our average debt client receiving Universal Credit is unable to afford their essential costs. With no chance of balancing their budget and no money leftover to repay their debts.

Many of these households, both in and out of work, rely on support from benefits. Benefits are designed to be increased, or uprated, with inflation each April. This prevents rising prices in the supermarket and at the petrol pump from reducing how far they stretch. With inflation at 10%, you would need to spend £11 today to afford the same goods that £10 brought you a year ago.

Coming into the cost-of-living crisis our benefit system was already threadbare. This forced Rishi Sunak, in his role as Chancellor, to introduce emergency cost-of-living payments as prices rocketed up and benefits lagged behind. These temporary payments have helped bridge some of the widening gap between benefits and living costs. But record numbers of households are still struggling. And they face a financial cliff-edge next spring when this support is exhausted.

Demand for our services has already shot up this year. But if benefits aren’t uprated we would expect the number of people we help with benefits in need of crisis support to triple next April. Benefits clearly need to rise with inflation, but we need to go further.

Annual uprating tries to keep the real value of benefits steady, but does a poor job of it when inflation is high. Ageing IT systems that take months to update mean the inflation measure used in April actually dates to the preceding September. So it’s already 6 months out of date. In times of low inflation that makes minimal difference, but right now it leaves benefits trailing rising living costs. This means that further one off interventions will be needed.

And while rent has been rising, support with housing costs in the private rented sector has remained frozen since 2020. This will only get worse as rising interest rates are passed on to tenants through rent increases. The link between Local Housing Allowance and rent must be restored to prevent people losing support from uprating to higher rents.

Benefits need to go up. But more will be needed to prevent the unwelcome records we’ve seen at Citizens Advice from becoming the new normal. That means further interventions to help with the cost-of-living crisis and more support with housing costs.