Former Tory leader Sir Iain Duncan Smith has called for benefits to be immediately upgraded in line with inflation to provide a ‘shield’ against the rising cost of living – with a one off payment of £729 at the same time . He said the rebates and discretionary funds represent “a step in the wrong direction to tackle poverty”, arguing that it would be better to increase Universal Credit (UC) because it “ties benefits to work”.
The recommendation to bring benefits in line with inflation is set out in a new report from the Center for Social Justice (CSJ) – a think tank founded by Sir Iain in 2004 – calling for a ‘special tax event’, funded by taxes higher than expected. revenue, to ease the pressure on cash-strapped households. UC payments rose 3.1% in April, in line with the rate of consumer price index (CPI) inflation for the year ending September 2021.
Meanwhile, CPI inflation rose to 9% on the year to April, data from the Office for National Statistics (ONS) showed on Wednesday, from an already high 7% in March. In its report, the CSJ says the government should consider reviewing benefit rates quarterly rather than annually, at least as long as “the current period of unusual inflationary pressures persists”.
The think tank says the first increase is expected to come at the end of June. It says bringing the UC in line with inflation would allow more than four million households to earn an average of £729 in extra support to avoid the cost of living crisis over the coming year.
As part of its set of recommendations, the CSJ is also calling for an increase in UC work allowances, which would provide “an effective tax cut” for 1.66 million working poor households, worth $733 million. pounds sterling, averaging £442 each.
These measures combined – increasing payments in line with inflation and increasing work allowances – would cost around £3.8billion, according to the think tank’s estimates. Sir Iain said: ‘The CSJ is calling for a special tax event to tackle this crisis and provide a shield against the worst of inflation for those who struggle the most.
“In UC, the UK has a data-rich, world-class social security system that is effectively targeted to the households that need it most. Rebates and discretionary funds are a step in the wrong direction in the fight against poverty. UC links benefits to work, ensuring that those who are able can access and progress in employment. So it’s a helping hand, not a handout.
He added: “While the decision to cut the UC cut in the Autumn Budget has put £1,000 back in the pockets of three million claimants, much of its value will be wiped out by inflation. And it will do nothing to protect those who do not work. With UC only up 3.1% in April, those who depend on welfare for their income will see a reduction of 7%.
“To avoid this, the Chancellor and Secretary of State for Work and Pensions should implement an emergency revaluation during the year, aligning the UC with inflation to ensure it covers the true cost of living.
The CSJ also wants the government to suspend UC debt repayments for six months and write off historic debts “resulting from design issues in the inherited benefit system”.
In addition, environmental levies should be absorbed into general taxation, and the energy price cap should be reviewed quarterly rather than every six months “to avoid steep prices”, he said. Last week, Mr Sunak said he was unable to increase payments by more than 3.1% due to an old IT system used by the Department for Work and Pensions.
The Institute for Fiscal Studies economic think tank has suggested that the poorest households could face inflation of 10.9%. This is higher than average because they spend more of their money on heating and lighting their homes.
A government spokesman said: “We recognize the pressures on the cost of living and are doing what we can to help, including spending £22billion over the next financial year to support people with bills energy and reduce fuel taxes. For those hardest hit, we are putting an average of £1,000 more a year in the pockets of working families on Universal Credit, have raised the minimum wage by more than £1,000 a year for full-time workers and our household support fund is there to help with the cost of basic necessities.
“We also know that people earn at least £6,000 in full-time work rather than benefits, so we are redoubling our efforts to help people find work and progress.”