Poorest Britons to Receive Record Welfare Rise, a Year Too Late

(Bloomberg) -- Britain's poorest households are on track to receive a record increase in benefit payments in 2023, a year too late to spare them from the biggest squeeze on living standards in memory.

The revelation prompted fresh calls from politicians and campaigners for Chancellor of the Exchequer Rishi Sunak to bring forward some of next year's support to help families now.

Official forecasts show welfare payments will increase by 20.5 billion pounds ($26.9 billion) in April 2023, the biggest annual increase ever seen and 2.2 billion pounds more than during the pandemic. A Treasury spokesman confirmed to Bloomberg that the rise will take place.

Benefits, which increase every April in line with the previous September's rate of inflation, rose by just 3.1% on Friday for the year ahead. Yet inflation is already at 6.2% and set to hit 8.7% before the year end.

Next year, though, the increase in benefits is expected to be 7.5% at a time when consumer prices have fallen back to 3.5%, according to the Office for Budget Responsibility. Inflation is projected to drop to 1.5% by the end of 2023.

That leaves Britain's poorest households facing severe hardship this year, followed by an unprecedented increase in spending power next year.

Sunak should “smooth the pain” to “provide vital nearer term relief where it is most needed,” said Mel Stride, a Conservative member of Parliament who leads the House of Commons Treasury Committee.

The Resolution Foundation and the Institute for Fiscal Studies were pressing the chancellor to smooth the impact, but he did not address the issue in his Spring statement.

Sunak told the Treasury committee this week that the obstacle to smoothing was “operational … because of how the Department for Work and Pensions' systems work. It is actually not possible to do it in a short space of time.”

Julian Jessop, a fellow at the Institute for Economic Affairs, a free-market think tank, said, “There's a bit of buck-passing going on.”

The chancellor has drawn attention to tax cuts as one of the key ways the Treasury is working to protect consumers from the spending squeeze.

“I know people are worried about making ends meet,” Sunak said in a statement on March 31. ‘That's why this tax cut for almost 30 million people is so important.”

His critics say tax cuts only help those in employment, doing nothing for some of the poorest families who depend on benefits.

“The government is capable of using the social security system to deliver support to people quickly,” said Katie Schmuecker, deputy director of policy and partnerships at the Joseph Rowntree Foundation.

“Instead of doing so again, the chancellor has chosen to weaken the incomes of the poorest. This choice will cause devastating hardship, forcing more people to go without the essentials, and that is simply wrong.”

The Treasury said, “Benefits will be uprated by consumer price inflation in the year to September. This is a legal process which is confirmed through statutory instruments.”