Chancellor announces second round of Cost of Living Payments

The second round of means-tested Cost of Living Payments was announced by the Chancellor on 17 November 2022, with a total amount of up to £900 paid in three instalments¹. The first payment of £301 was made between 25 April and 17 May 2023, the second of £300 between 31 October and 19 November 2023, and the third of £299 was due to be paid by spring 2024¹.

The payments followed a first round made in 2022 to over 8 million households on Universal Credit, Pension Credit and eligible legacy benefits, worth up to £650¹. Separately, around 6 million people received a £150 Disability Cost of Living Payment, and over 8 million pensioner households received £300 as a top up to their Winter Fuel Payment¹. The government said support to households with the high cost of living is worth £104 billion over 2022/23 to 2024/25¹.

Eligibility required a claimant to be entitled to at least 1p of a qualifying social security benefit in the qualifying period¹. The Department for Work and Pensions said the three-payment structure was intended to reduce the chance of someone missing out altogether, because those who do not qualify for one instalment may qualify for another¹. It also said 85% of those who received no Universal Credit award during the qualifying period for the first 2022 payment of £326 had no award solely due to earnings¹.

Why it matters for households

The payments were means-tested and automatic, so most recipients did not need to apply. The qualifying rule meant entitlement turned on receiving at least 1p of a qualifying benefit during a set period, so a household whose Universal Credit award fell to nil in that period, for example because of a month with higher earnings or arrears, could miss an instalment¹. The committee that examined the scheme said a person earning just £5 over the qualifying threshold could lose nearly £300 and be worse off than someone just under it¹. The government said it kept the rules simple to minimise fraud and error, and that paying people with resources making them ineligible for means-tested benefits was not the intention of the payments¹.

State pension and benefit rates rose by 10.1% in April 2023 in line with prices, and from April 2024, subject to parliamentary approval, most benefit rates were to rise by 6.7% in line with prices, with relevant State Pension and Pension Credit rates up 8.5% in line with earnings¹. An evaluation of the Cost of Living Payments was underway¹.

What happens next

The committee published its first report on cost of living support payments on 14 November 2023, and the government response was received on 12 January 2024¹. The committee recommended changing eligibility so that Universal Credit claimants with a nil award in the qualifying period, but a payment in the previous and subsequent assessment periods, would qualify, and adding Housing Benefit as a qualifying benefit; the government did not accept either change, citing complexity, fraud and error risk, and the local administration of Housing Benefit¹. It pointed instead to the Household Support Fund, extended by £842 million until March 2024, as a flexible route to help those who missed out¹.