Benefits uprating and benefit cap rise in line with inflation

The UK Government decided to uprate benefits and raise the benefit cap in line with inflation from April 2023¹. The Resolution Foundation said the Autumn Statement had confirmed a decision to "raise benefits in line with prices, or 10.1 per cent in April", and that "the benefit cap, usually frozen in cash terms every year, is also being increased by 10.1 per cent"². The Department for Work and Pensions recorded that its guidance was "Updated with the latest benefit rates, effective from 10 April 2023"³, and the Pension Credit technical guidance was "Updated with the latest benefit rates, effective from 11 April 2023"⁴. New Style Employment and Support Allowance guidance was likewise "Updated with the latest benefit rates, effective from 10 April 2023"⁵.

The uprating was announced alongside other changes. The Resolution Foundation noted that "The National Living Wage is set to rise from £9.50 to £10.42 next April"², and the Work and Pensions Committee recorded that "On 1 April 2023, the government will increase the National Living Wage (NLW) for workers aged 23 years and over by 9.7% to £10.42"⁶. The same committee said "The government has announced plans to apply the Triple Lock in 2023/24 and subject to parliamentary approval State Pensions will increase by 10.1%"⁶.

The increase in benefit rates also moved the earnings point at which means tested support ends. Entitledto, an independent benefits calculator provider, said that for a working couple without children renting privately in outer north London, where "the rent cap is £230.77 a week for a couple", the household "qualifies for Universal Credit if, between the two individuals, their gross earnings are under £38,800", and that "Because of the increase in benefit rates from April this cut-off point increases to £39,700"⁷. It added that "any entitlement at all, even a few pounds a month, means the household qualifies for the cost of living payments worth £900"⁷.

Separately, Entitledto reported that "from July this year the maximum amount Universal Credit claimants can include for childcare costs for one child is going up to £951 a month", up "from £646 a month at the moment (where it's been fixed since the inception of UC nearly ten years ago)", with "The amounts for two or more children are £1,630 a month (up from £1,108)"⁷. It noted that "the limit is not increasing for people who claim Child Tax Credit"⁷. For a couple with one child in full time nursery paying the national average of £14,836 a year, it said eligibility for Universal Credit "would run out for this couple when their earnings (between the two of them) reached £44,000 a year" in 2022/23, rising to "when their joint earnings exceed £57,000 a year" from July⁷.

The Trussell Trust, giving written evidence to a Senedd committee in January 2023, described "the decision to uprate benefits and raise the benefit cap in line with inflation from April 2023"¹. It also set out earlier cost of living payments: "In July 2022, the UK Government provided the first Cost of Living Payment of £326 to people in receipt of means tested benefits owing to low income", and "A second payment of £324 followed in November 2022"¹.

Why it matters for households

The uprating applied to benefit rates from April 2023, with the Department for Work and Pensions giving 10 April 2023 as the effective date for the rates it published³ and 11 April 2023 for Pension Credit⁴. The benefit cap rose by the same 10.1 per cent². Because rates rose while the income tax and National Insurance personal allowance was frozen, Entitledto said more working households would qualify for means tested support even where earnings had barely kept pace with prices⁷. It also said that for private renters paying above the Local Housing Allowance limit, which had been frozen rather than increased in line with rents, April's increase "will be used up (sometimes in full) by rent increases they have to meet out of their personal needs amount"⁷.

The Trussell Trust's evidence described the pressure on households receiving Universal Credit before the uprating. In its August 2022 survey of 1,846 people in receipt of Universal Credit, "One fifth (19%) of people in receipt of Universal Credit across the UK said they faced real financial problems and had fallen behind with bills and credit commitments", and "A further 34% said keeping up with bills and credit commitments was a constant struggle"¹. In Wales, "14% said they faced real financial problems and had fallen behind with bills and credit commitments, 40% said keeping up with bills and credit commitments was a constant struggle"¹. Across the UK, "34% of people in receipt of Universal Credit said they had fallen into debt because they couldn't keep up with essential bills (e.g. rent or utilities) during the previous three months", and "19% said they were currently behind on their energy bills"¹. The Trust also reported that "40% said they had needed to skip meals to keep up with other essential living costs", and "21% had been unable to cook hot food because they couldn't afford to use the oven or other utilities"¹.

The Trust said the first Cost of Living Payment coincided with a dip in demand: food banks in its network in Wales distributed 10,500 parcels in July 2022, against an average of 13,200 in the other five months of the April to September period¹. It added that "The Cost of Living payment was spent quickly", with "Almost two in three (64%) who said they had spent some of the payment had used it to buy food"¹.

What happens next

The childcare cost limits within Universal Credit were due to change from July 2023, rising to £951 a month for one child and £1,630 a month for two or more⁷. The National Living Wage rate of £10.42 for workers aged 23 and over took effect on 1 April 2023⁶. The State Pension increase of 10.1 per cent for 2023/24 was subject to parliamentary approval⁶. No further dated steps beyond these were reported in the material available.