Nine million families will be £500 worse off from April

Benefits such as universal credit will rise by less than half the inflation rate this April, leaving nine million families £500 poorer as the cost of living crisis deepens.

It means another 400,000 people could be pulled into poverty while the price of everyday goods in the UK soars, new analysis reveals.

Economists predict inflation will hit seven per cent, but ministers said they would only increase benefits for people on low incomes by 3.1 per cent.

“At a time when the case for support could not be clearer, the government is choosing to further erode the value of benefits that are already wholly inadequate,” said Peter Matejic, deputy director of evidence and impact at the Joseph Rowntree Foundation (JRF) which carried out the research.

“People on the lowest incomes have already experienced a decade of cuts and freezes, followed by an overnight cut of £1,000 last autumn [when the government cut universal credit by £20 per week]. The decision not to uprate benefits in line with inflation represents another cut for millions of people whose incomes will now fall even further behind the cost of living.”

Out-of-work benefits are already at their lowest rate in real terms in 30 years, analysts said.

Couples with children who receive social security payments will face an even bigger cut of £720 per year once rising prices are taken into account, while pensioners will lose out on an annual £540.

The energy price cap increase also scheduled for April will mean average fuel bills could hit £2,000 per year, which campaigners warned would force households to choose between food and heating their homes. Disadvantaged families will be spending an average 16 per cent of their incomes – after housing costs – just on energy bills, JRF said, while government support through a council tax rebate and loans will only cover 60 per cent of the price rise.

Boris Johnson’s national insurance hike will mean payments rise by 1.25 percentage points in the same month.

“There can be no justification for this,” Matejic added. “Our social security system should protect people from harm, not put them in danger. 

“The government must change course and ensure that benefit levels reflect the higher rate of inflation we are all now experiencing. There is no doubt that a failure to do so will leave more people in our society unable to meet their most basic needs.” 

Last month ministers announced a change in the rules for universal credit claimants looking for work which means they have four weeks – down from three months – to find work in their field. If they do not then broaden their search for a job they could face sanctions, which have been linked to rent arrears and higher food bank use.