Government announces substantial cost of living support package

The government announced a further package of cost of living support at the end of May 2022, supplementing measures announced in February and March, according to the Work and Pensions Committee¹. The Committee said the interventions combined universal support with more targeted payments delivered through the benefits system, and included those on legacy benefits¹.

The package included a low income cost of living payment of as much as £650, paid in two parts: the first £326 from 14 July 2022 and the second £324, paid automatically to most people between 8 and 23 November². A £150 disability payment was made to those in receipt of disability benefits, with entitlement determined by benefit receipt on 25 May 2022³. Pensioners received an extra £300 top-up to the Winter Fuel Allowance, for which recipients had to have been born before 26 September 1956³. Every household connected to mains electricity received a £400 energy bill discount, credited in six roughly equal monthly instalments from October 2022⁴. A £150 council tax rebate was offered from April 2022².

In Northern Ireland, households began to receive the £400 energy support from November³. The Energy Bills Support Scheme discount was extended from 1 October 2022 to the 1% of households who had not previously received it⁴. The government also announced an energy price guarantee restricting the unit prices that can be charged for electricity and gas for two years from 1 October 2022, with average unit prices of 10.3p/kWh for gas and 34p/kWh for those on standard tariffs, and standing charges unaffected³.

The Work and Pensions Committee, publishing its report on 27 July 2022, said much of the package was made up of one-off payments and that the government had been clear these were emergency measures that would not become ongoing or regular payments¹.

The Committee also said the April 2022 uprating, when inflation was already 9%, was based on the CPI rate from September 2021 of 3.1%, causing a real-terms fall in income¹. The Scottish government's analytical report, published 2 November 2022, said UK benefits and state pensions were uprated in April 2022 using the annual rate of CPI to September 2021 of 3.1%, lower than the 7.0% recorded in March 2022, with inflation rising to 10.1% in September⁴. Scottish low income benefits were uprated by 6% in April 2022⁴.

Why it matters for households

The payments were made automatically to most recipients, and the Department for Work and Pensions issued a warning about scams regarding cost of living payments, energy and council tax rebates². Which? reported fake texts and emails asking people to claim or apply for payments, and cold calls offering the £150 council tax rebate and asking for bank details; the Local Government Association said councils would not call asking for bank details². The energy rebate was processed automatically for those paying council tax by direct debit, while others were told to await a letter from their local council².

The Scottish government report said the IFS predicted in August that the poorest fifth would face an 18% inflation rate in October 2022, compared with 11% for the richest fifth, and that lower income households spend almost three times as much of their budgets on gas and electricity as the highest-income tenth (11% versus 4%)⁴. It said 30% of households in Scotland did not have enough savings to keep them above the poverty line for one month if they lost their income, rising to 50% for the lowest-income 20%⁴.

The Committee said 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 years, and that Local Housing Allowance had been frozen in cash terms since 2020¹. It said deductions for Universal Credit advances and overpayments left many people struggling, and that repayments to the DWP are not subject to the same affordability assessments expected in consumer credit markets¹. The Scottish report said the £20 per week Universal Credit uplift, announced in March 2020, was withdrawn in October 2021, meaning a fall in income for over 400,000 households in Scotland⁴.

What happens next

The Committee's report was published on 27 July 2022 and the government has two months to respond¹. The Committee recommended the Department for Work and Pensions develop an evidence-based Pension Credit take-up strategy by the end of 2022, with actions over five years and an annual update to the Committee¹. Advice NI said support for organisations was likely to shift to more targeted help from April 2023, and that beginning in 2023 Tax Credits claimants would be required to move their claim to Universal Credit³.