MILLIONS of people on Universal Credit and other benefits have been forced to wait to see if they will be better or worse off next year.
The Chancellor has today announced a number of mega tax U-turns to calm markets after the aftermath of last month's mini-Budget.
However, millions of households on Universal Credit and benefits have been left in the dark over whether rates will be increased in line with inflation next year.
It comes as the new Chancellor, Jeremy Hunt, announced a number of mega mini-Budget u-turns today in a bid to calm markets.
He ripped up the planned 1p cut to the basic tax rate indefinitely, as well as scrapping VAT for foreign tourists visiting the UK and freezing alcohol duty rates from next year.
A major change has also been made to the energy price guarantee, which will now only freeze energy bills for six months.
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Only a handful of policies survived, including the Stamp Duty cut and reversal of National Insurance rate hikes.
It is expected that this will be announced on Halloween (October 31), when full details of the Medium Term Fiscal Plan will be revealed.
The plan will outline how the government will pay down its soaring debts.
Experts have raised concerns that millions on benefits will be pushed further into poverty if their payments are not increased to match inflation from April next year.
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James Taylor, director of strategy at disability equality charity Scope said: “Today's announcements were more about reassuring markets than reassuring people.
“Up and down the country millions of disabled households are facing a tough winter with impossible choices to make.
“Today the Chancellor should have announced how these choices are going to made easier, by committing to uprate benefits in line with inflation and by increasing the payments made to disabled households to deal with increasing energy bills.
“It’s crucial government now acts on concerns of disabled people and restores the confidence and financial stability we need to live our lives."
For many years benefits have been raised each April in line with the Consumer Prices Index measure of inflation from the previous September.
But the Government has yet to confirm whether it will do so this year.
It is weighing up whether to raise benefits in line with wages instead, which would likely mean a much lower rise of 5.5 per cent instead of about nine per cent.
Former Prime Minister Gordon Brown estimates this would leave struggling families £40 a week worse off, or £2,000 a year.
Benefits are already lagging a long way behind runaway living costs, leaving many facing a shortfall.
When they were last increased in April, it was based on the previous September’s figure of 3.1 per cent, but at the time inflation was running three times higher.
What happens if rates are linked to wages?
It’s not yet known exactly how the Government would calculate the benefits rise if it decides to link it to wages instead of inflation.
But it’s thought ministers could use the figure of 5.5% because this is the average increase in total earnings from May-July 2022 that was released by officials last week.
If it does so, those on benefits will still see an increase in the amount of money they receive.
But in real terms they will feel a whole lot worse off because rocketing costs mean they’ll be able to buy less with their money.
That's because rates will not be matched against runaway inflation, which is what goods and services are worth in a country.
If it is higher, that means everyday essentials such as food are more expensive.
It stands at 9.9% currently, and it means millions are struggling to make their money stretch to cover the cost of living.
Universal Credit
Almost five million people claim Universal Credit, which was first introduced in 2013.
Under the system, you receive different amounts depending on your circumstances. They are:
- If you're single and under 25 – £265.31
- If you're single and 25 or over – £334.91
- If you live with your partner and you're both under 25 – £416.45 (for you both)
- If you live with your partner and either of you are 25 or over £525.72 (for you both)
If you are looking at how much your Universal Credit will rise to from April next year based on inflation at 10%, you just have to divide your current payment by 100 and multiply by 10.
You then add that onto your current payment.
So, if you live with your partner and you're both under 25 you'll currently be getting £416.45 between you a month.
If your Universal Credit were to rise in line with inflation at 10%, your payment would go up by £41.64 to £458.09.
If it were to rise in line with wages at 5.5%, your payment would go up by £25.19 to £441.64. That's over £15 less per month.
Housing Benefit
Housing Benefit is designed to help you pay your rent if you're unemployed, on a low income or claiming benefits.
It is being replaced by Universal Credit through what's called "Managed Migration", however not everyone has been transferred across yet.
What you get through Housing Benefit depends on your circumstances – including how much you pay in rent, where you live and your personal circumstances.
But if you were theoretically receiving £100 every four weeks and that were to rise in line with inflation at 10%, you would receive £110 a month, a £10 pay rise.
If it were to go up with wages at 5.5%, you would receive £105.50 a month, a £5.50 pay rise. That's a difference of £4.50.
Over the course of a year, that's a £234 difference.
Income Support
Income Support is extra money for people who don't have enough to live on.
It's a means-tested benefit which means your income, savings and any sources of cash are taken into consideration when deciding how much you'll receive.
How much you get depends on your personal circumstances, however if you're single and aged between 16 and 24, your weekly payments start from £61.05.
If it were to go up in line with inflation at 10%, you would receive £67.15 a week – a £6.10 pay rise.
If you are aged between 16 and 24 and single and your weekly payment were to go up in line with wages at 5.5%, you would receive £64.40 a week – a £3.35 increase.
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That means you'll get £2.75 less a week if your payment go up in line with wages and not inflation.
Over the course of a year, that's a £143 difference.
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