Benefits set to rise for first time in five years – but the safety net is still eroding

Working-age benefits – including Child Benefit, Universal Credit, non-disability Tax Credits and Jobseeker’s Allowance – are set to rise by 1.7 per cent next April, their first cash increase in five years as the four-year benefit freeze comes to an end, according to new Resolution Foundation analysis published today (Wednesday).

The analysis – drawing on today’s ONS inflation figures for September, which are used to uprate benefits the following April – notes that while working-age benefits are finally set to keep pace with rising prices. However, the impact of the benefit freeze on lower income families will continue, and the social security safety net for working-age families is still eroding relative to earnings and pensions.

The Foundation’s analysis shows that the benefit freeze has baked in big and lasting cuts, having reduced the real-terms value of working-age benefits by 6 per cent since 2015, and left the average couple with kids in the bottom half of the income distribution £580 a year worse off.

The strength of the social security safety net will also continue to erode ­– unless there is a change in policy. That’s because the 1.7 per cent rise means that benefits are increasing at less than half the pace of wages (new data this week showed that average pay grew by 3.9 per cent in the three months to July), or the state pension next April (which, under the triple lock, will also rise by the July pay figure of 3.9 per cent).

The long-term delinking of working-age benefits to earnings (in contrast to the state pension, or the minimum wage) means, for example, that unemployment support has fallen to a record low of 14 per cent of average earnings, down from 27 per cent at the emergence of the Beveridge system.

The Foundation says that the continued erosion of working-age benefits – which are particularly vital for families with young children – is hard to justify when children born between 2016 and 2020 are facing the joint-highest rates of early years poverty since records began 60 years ago.

It adds that with political parties preparing for an imminent election, now is the time re-think their approach to working-age benefits, and to re-prioritise support for lower-income families.

Adam Corlett, Senior Economic Analyst at the Resolution Foundation, said:

“Today’s inflation figures have confirmed that working-age benefits received by millions of families are set to rise in line with prices by 1.7 per cent next April. This is their first cash increase in five years.

“But while the benefit freeze is over, its impact is here to stay with a lower income couple with kids £580 a year worse off as a result. And because benefits will only keep pace with rising prices, the social security safety net will continue to erode – falling further behind earnings and the state pension.

“With children born today facing the highest risk of poverty in 60 years, it’s time the main parties rethought their approach to welfare, and reprioritised their efforts towards supporting low and middle income families.”