Benefits uprated by 3.1% while inflation stood at 9%

Benefits including the State Pension were uprated by 3.1 per cent in April 2022, a figure set from the Consumer Prices Index rate for September 2021, at a time when inflation was already 9 per cent¹. The Resolution Foundation said most benefits, including the State Pension, were "set to be uprated by 3.1 per cent in April 2022 at a time when the cost of living could be rising by more than 8 per cent"².

The Work and Pensions Committee, in a report published on 27 July 2022, said the April 2022 rise "was based on the CPI rate from September 2021, which was 3.1%, causing a real-terms fall in income"¹. It said the Government had told the committee the seven-month gap between the inflation reference point and the uprating date was caused by legacy IT systems requiring manual inputting, meaning changes take months to implement¹. The committee called on the Government to close the gap between the inflation reference point and uprating¹.

The Joseph Rowntree Foundation, in a report published on 26 January 2023, said: "In April 2022, benefits only increased by 3.1% when inflation was much higher. This meant April 2022 saw the greatest fall in the value of the basic rate of unemployment benefits since 1972, when annual uprating began"³. The Resolution Foundation estimated the value of most benefits could fall by 4.2 per cent in real terms over 2022-23 as a whole, equivalent to a one-off £10 billion cut to benefit spending in that year².

Other elements of support were also held down. The Work and Pensions Committee said Local Housing Allowance had been frozen in cash terms since 2020, when its value was reset to the 30th percentile, and that the benefit cap had remained frozen at the same level since it was lowered in 2016 and had not been reviewed by the Secretary of State despite a statutory requirement to do so every five years¹. The Resolution Foundation said those renting privately and receiving housing cost support through Universal Credit or legacy benefits would see no additional support for rents in 2022-23 or beyond, and that the benefit cap also remained frozen².

The Resolution Foundation said the real cut in benefit values in 2022-23 was set to be largely undone in April 2023, when benefits could rise by 7 per cent or more, which would be the largest permanent nominal increase for most benefits since 1991-92². The Joseph Rowntree Foundation said that in April 2023 benefits and the benefit cap would be increased in line with inflation, with lump sums added, but that Local Housing Allowance would continue to be frozen³.

Why it matters for households

The 3.1 per cent rise applied from April 2022 to most working-age benefits and the State Pension, while the inflation measure used to set it dated from September 2021¹. For households whose income comes mainly from benefits, the gap between the two meant the buying power of that income fell over the year, with the Resolution Foundation estimating a 4.2 per cent real-terms fall in the value of most benefits across 2022-23². The Joseph Rowntree Foundation said the real-terms purchasing power of households receiving benefits continued to fall as the cost of living rose through 2022³.

Housing support did not rise at all: Local Housing Allowance rates stayed at their cash level from 2020, so private renters receiving help with rent through Universal Credit or legacy benefits saw no increase in that help even as rents rose¹. The benefit cap stayed at its 2016 level, which the committee said mainly affects larger families¹. The Resolution Foundation said the real cut was expected to be largely reversed in April 2023, when benefits could rise by 7 per cent or more², and the Joseph Rowntree Foundation said benefits and the cap would rise in line with inflation that April, with Local Housing Allowance still frozen³.

What happens next

The Work and Pensions Committee's report was published on 27 July 2022 and the Government had two months to respond¹. The committee recommended that the Department for Work and Pensions work with stakeholders to develop an evidence-based take-up strategy for Pension Credit by the end of 2022, setting out actions over the following five years with an annual update to the committee¹. It also recommended that deductions from benefits be paused and restored gradually as inflation reduces, or once benefits have been uprated to reflect the current rate of inflation¹. The Joseph Rowntree Foundation said the Office for Budget Responsibility expected inflation to fall through 2023 but remain well above the Bank of England's target for the whole year, and that wages were forecast not to keep up with inflation for the whole of 2023³.