Social Security Benefits Up-rating Order 2022 debated

The Social Security Benefits Up-rating Order 2022 was debated in February 2022. The Work and Pensions Committee, in a report published on 27 July 2022, said it first took evidence on the cost of living crisis in February 2022, when inflation was forecast to peak at 7.25% in April 2022¹.

The committee said the April 2022 rise, when inflation was already 9%, was based on the CPI rate from September 2021, which was 3.1%, causing a real-terms fall in income¹. It said the reasons given by the Government for this seven-month gap were very similar to what it heard during the pandemic: legacy IT systems require manual inputting, meaning changes take months to implement¹. The committee added that it was unfortunate this was not referred to in the Government's response to calls for social security support to be uprated in line with inflation estimates when the order was debated in February 2022¹.

The committee also set out other elements of the system it said had been held down. It said the level of Local Housing Allowance has been frozen in cash terms since 2020, when the Government reset its value to the 30th percentile¹. It said the benefit cap has remained frozen at the same level since it was lowered in 2016 and has not been reviewed by the Secretary of State, despite the statutory requirement to do so every five years¹. It said evidence echoed what its predecessor committee heard in 2019: that the cap is causing real hardship and mainly affects larger families¹.

On deductions, the committee said repaying advances, particularly from the five-week wait, left many people struggling when they moved onto Universal Credit, and that deductions for overpayments were often unclear and unexpected, some coming years after they were accrued¹. It said repayments to the DWP are not subject to the same affordability assessments expected in consumer credit markets, and many families cannot afford these deductions from social security payments which are already behind inflation¹.

The committee said the Government announced a collection of measures to help households with the rising cost of living, initially in February and March and supplemented in May with a more substantial package¹. It said inflation now looks set to top 11% in October, the highest in 40 years¹. It cited 2019 figures from the Resolution Foundation that social security spending will be around £34 billion lower in 2023 to 24 than it would have been if the 2010 social security system had remained in place, and said UK social security support as a percentage of GDP is below EU-27 and OECD averages¹.

Why it matters for households

The uprating order set the rates that applied from April 2022. Because those rates were based on the September 2021 CPI figure of 3.1% while inflation was already 9% at the time of the rise, the committee said the result was a real-terms fall in income for people receiving social security support¹. The seven-month gap between the inflation reference point and the point at which rates change is the mechanism the committee identified as the cause¹.

Two other elements affect how far payments stretch. Local Housing Allowance has been frozen in cash terms since 2020, so it has not followed rents or prices upwards¹. The benefit cap has stayed at the level set when it was lowered in 2016, and the committee said it mainly affects larger families¹. Deductions taken from Universal Credit for advance repayments and overpayments reduce the amount actually received, and the committee said these are not subject to the affordability assessments used in consumer credit markets¹.

The committee also said many people who need Pension Credit do not claim it, and that it is increasingly an important way of ensuring older people have the support they need during this crisis¹. Details of how to claim and how benefits are administered are set out in the benefits hub, and the process of moving from older benefits is covered in Moving to Universal Credit from legacy benefits.

What happens next

The report is a House of Commons Committee report with recommendations to government, and the Government has two months to respond¹. The committee recommended that the Department for Work and Pensions work with stakeholders to develop an evidence-based Pension Credit take-up strategy by the end of 2022, setting out actions to deliver it over the next five years, with an annual update to the select committee on achievements and any amendments¹. It also recommended that the Government conduct the benefit cap review urgently and uprate the cap accordingly¹. It said that if deductions are not paused, the Department must ensure accessible and practical debt advice is available to those struggling¹.