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Cost of living crisis: UK benefits plunge to lowest value in 50 years

·4-min read
<span>Photograph: Aaron Chown/PA</span>
Photograph: Aaron Chown/PA

Scheduled 3.1% rise in state pension and benefits fails to keep up with 8% hike in prices of essentials and energy

Pensioners and benefits claimants will see the value of their payments fall to the lowest point in 50 years on Monday, anti-poverty campaigners have said, as Britons grapple with the worst cost of living crisis since 1972.

Despite everyday prices rising as much as 8%, and gas and electricity bills almost doubling to £2,000 a year, the state pension and most other state benefits will rise by 3.1% on Monday.

Charities, Labour and others have called on the chancellor, Rishi Sunak, to do more to help those on middle and low incomes get through the crisis.

So far ministers have resisted calls to restore the £20-a-week uplift to universal credit that was introduced during the pandemic but then removed just as prices started rising dramatically last autumn.

The money-saving expert Martin Lewis said on Sunday that the UK could experience “civil unrest” later this year if the government fails to take decisive action.

Ministers announced in November that the state pension, universal credit and a host of other benefits would rise by 3.1%. The figure was calculated according to the consumer price index (CPI) for the year up to September 2021.

Related: Cost of living crisis: Rishi Sunak must at the very least raise UK benefits

The increase means that the basic state pension will rise by £4.25 to £141.85 per week, while the full new state pension will rise by £5.55 to £185.15.

A single person aged 25 will see their universal credit allowance rise from £324.84 to £334.91 per month, totalling £4,019 a year. Child benefit rises 68p per week for the eldest child.

Watch: Is a UK state pension enough to survive on in retirement?

However, since September the price of most essentials has rocketed. According to the latest UK economic outlook report from PwC, British households are set to be £900 worse off this year in a “historic fall” in living standards. It found that inflation will hit 8.4% later this year.

Related: If the rest of Europe can protect the poorest from rising bills, why can’t Britain? | Carsten Jung

Helen Barnard, the associate director of the Joseph Rowntree Foundation, an anti-poverty group, told Sky News that pensioners and benefits claimants had seen the value of payments fall in real terms in eight out of the last 10 years. “It means that in terms of their values, how much bread and milk you can buy in the shops, it is the biggest fall in value since 1972.”

She added: “We know the majority of people in poverty now are in working households. One of the problems is that too many jobs are not just low paid, but they’re insecure – you don’t know what money you’re getting one week to the next, you don’t get sick pay; you don’t get protection if something goes wrong. People are struggling to afford the basic essentials and having to rely on charities for toothpaste and toilet rolls. It’s humiliating for a lot of people.”

Jonathan Ashworth, the shadow work and pensions secretary, said Sunak had imposed the deepest real-terms cut to the state pension in 50 years and a second deep cut to universal credit in six months.

Related: ‘Heat the human, not the home’: Martin Lewis guide for ‘desperate’ households

“These severe real term cuts are a direct consequence of his point-blank refusal to take into account current price rises in setting rates,” he said. “His decision will help push an extra 1.3 million people including 500,000 children into absolute poverty. It’s now clearer than ever that the working people, disabled people and pensioners are worse off under the Tories.”

A government spokesperson said: “We recognise the pressures people are facing with the cost of living, which is why we’re providing support worth £22bn across the next financial year and, as was approved by parliament, benefits are being uprated by the usual measure, September’s inflation figure.

“Our package of support includes putting an average of £1,000 more per year into the pockets of working families via changes to universal credit, cutting fuel duty and helping households with their energy bills. We have also boosted the minimum wage by more than £1,000 a year for full-time workers and are raising national insurance thresholds so people keep more of what they earn.”

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