Universal Credit DWP and PIP Recipients Expected to See Significant Increase in 2023
Benefit claimants in Nottingham are among millions in the UK who are set to see their payments rise in 2023. The news comes as costs are set to continue to soar with increases in fuel and energy prices that will hit many households hard.
And while inflation is also expected to soar, government support will only increase by 3.1% in April, which is based on the September inflation figure, Reporting live from Birmingham. But since that point inflation has risen to 6.2% in February this year and it is set to rise further, with the Office for Budget Responsibility suggesting the consumer price index could hit a 40-year high of 8.7% over the past three months. of 2022.
This is mainly due to the war in Ukraine and energy costs. The Bank of England went even further, suggesting that inflation could hit 10% if the energy price cap rises again in October.
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And while all of this is bad news for household budgets, it promises better news for the next fiscal year, as government payments are based on inflation. For the financial year 2022/2023, all benefits increase by 3.1% in line with the decision to increase the state pension by this amount.
Pension increases are normally based on a triple lock which increases them according to the greater of inflation, average wage increases or 2.5%. But with the increase in wages at the end of the furlough, this would have been the predominant factor of the three and would have resulted in an 8% increase in pensions.
Thus, the DWP announced last September that it would set aside the salary element and instead use the inflation figure of 3.1% at that time. Work and Pensions Secretary Therese Coffey has promised the triple lock will be reinstated for the following year – with soaring inflation suggesting payout increases of 8-10% for 2023/2024. If an 8% increase is applied, pensions will increase by £770 over the year. All other benefits would then receive the same percentage increase.
This was confirmed by Treasury Minister Simon Clarke, who told MPs that high inflation “will be reflected” in the figures for the April 2023 rise if the current forecast materializes.
Mr Clarke, opening the debate on the National Insurance Contributions (Rising Thresholds) Bill, told the House of Commons: ‘The UK spends £243billion a year on our social expenditure wider, including pensions. This is a country where we do a huge amount to make sure everyone is taken care of.
“We have to look at all our decisions in the context of both broader accessibility and how the system works. The welfare system still works on the basis of an increase in September for changes the following April.
“If there is high inflation, as expected, during 2022, this will be reflected in the April 2023 increase figures and the triple lockdown will be in place to protect families.”
He later confirmed: “To the extent that the forecast for very high inflation for this year does indeed materialize, this will be reflected in the reset figures to be delivered this fall for the 2023 benefit reset.”
The bill implements a policy announced by Chancellor Rishi Sunak in his spring statement to raise the threshold at which people pay National Insurance. The NI thresholds where it starts to apply will rise from £9,880 to £12,570 from July, aligning income tax and NI in a tax cut worth over £6billion , according to the Treasury.
The government estimates this will benefit almost 30million UK workers and save the typical employee more than £330 in the year from July.
Labor’s Stephen Timms, who chairs the Work and Pensions Committee, highlighted concerns that Universal Credit Applicants will lose 55% of the £330 tax reduction ‘due to a reduction in Universal Credit’.
Shadow Treasury minister James Murray said the bill had more to do with the chancellor wanting to portray himself as a tax-cutting hero.
He said: “We will support today’s bill because any help for people facing the Chancellor’s National Insurance tax hike in April is something we welcome. There are benefits to raise the threshold at which people start paying national insurance.
“But we have to be aware that this bill has more to do with the Chancellor’s increasingly desperate desire to portray himself as a tax cutter than it does with a well-thought-out set of measures to help people overcome the difficulties they face. Even after this bill passes, the truth is that our country’s tax burden will still be at its highest in 70 years.”
Labour’s former shadow chancellor John McDonnell said action was also needed on wages, warning: “Unless we only knew inflation proof wages, I now predict that we we will see an upsurge in social conflicts in our country.”
Mr. McDonnell gave the example of municipal workers and their below-inflation wage settlement.
He said: ‘What we should be doing, and I’m just calling on the government to look at public sector wages because obviously they set the conditions for the private sector as well, unless we do pay deals at proof of inflation, which we will find that often the lowest paid workers will be hit hard by the erosion of their wage status due to inflation.”
The Bill received a third reading without opposition and will be given further consideration by the Lords at a later date.
The largest DWP payout is the state pension, with 12.5 million recipients. This is called a contributory benefit because the amount is based on a person’s national insurance contributions – other benefits of this type are New Style Jobseeker’s Allowance (JSA), New Style Employment Support Benefit (ESA) and Bereavement support payment.
Some benefits are means-tested, meaning they are based on a person’s income and savings. The largest of these is Universal Credit, which has 5.6 million claimants according to the latest figures and is the second largest DWP payout after State Pension. Around 40% of people on Universal Credit are working and claiming the benefit to top up low wages.
Other means-tested benefits are income-based Jobseeker’s Allowance, Income-related Employment and Support Allowance, Income Support, Housing Benefit, Employment Credit tax (from HMRC) and pension credit.
And then there are the Personal Independence Payment (PIP) and Disability Living Allowance (DLA) disability benefits, both determined by a person’s need for extra help to deal with long-term health issues. not on the basis of means or national insurance contributions. Nearly 2.8 million people are on PIP and a further 1.3 million on DLA.