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personal finance

Benefits to rise 1.7% with inflation in first increase in five years

Households squeezed by the government’s benefits freeze are set to receive the first cash increase in payments in five years, despite the austerity policy costing lower-income families £580 each year since 2015.

According to the Resolution Foundation, working-age benefits – including child benefit, universal credit, non-disability tax credits and jobseeker’s allowance – are poised to rise with inflation by 1.7% next April.

It would mark the first cash rise since George Osborne launched the benefits freeze in 2015. However, the government has yet to confirm its spending, tax and benefits plans for the year ahead, when the freeze was due to end.

The assessment comes after the Office for National Statistics (ONS) said inflation remained unchanged in September, with the consumer price index (CPI) holding steady at 1.7%.

The inflation reading for September is used by the government to uprate the value of benefits payments each year, as well as state pensions and business rates.

According to the latest snapshot from the ONS, inflation stayed at 1.7% as sliding fuel prices were offset by increases in the cost of furniture, household appliances and the cost of booking a hotel room.

The Resolution Foundation said the benefits freeze had baked in big and lasting cuts for working families, cutting the real-terms value of benefits by 6% since 2015 and leaving the average poor couple with children £580 a year worse off.

The thinktank said the social security safety net was continuing to erode, as wages and pensions rise by more than double the rate of benefits.

The state pension is expected to rise by 3.9% from next year, more than double the rate of inflation, as a result of the government’s pensions triple lock. State pensions are uprated each year by whichever is highest from September’s inflation rate wage growth over the year to August, or 2.5%.

Workers’ average wages rose by 3.9% in the year to August, the fastest rate in more than a decade.

Adam Corlett, a senior economic analyst at the Resolution Foundation, said: “While the benefit freeze is over, its impact is here to stay. With children born today facing the highest risk of poverty in 60 years, it’s time the main parties rethought their approach to welfare, and reprioritised their efforts towards supporting low and middle-income families.”

Accountants also warned the latest inflation reading would mean a rise in business rate costs worth a total £536m next year, hitting the retail sector amid tough trading conditions on the high street.

Alex Probyn, the UK president of expert services at Altus Group, a property consulting firm, said: “Business want and expect the chancellor to deliver a pro-business autumn budget amid these uncertain times and Sajid Javid could do that, in part, by being the first chancellor in history to scrap the inflationary rise next year.”


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