Families will still face enormous challenges in making ends meet, despite the support package unveiled to combat the cost-of-living crisis, according to money experts.
Charities also said Chancellor Rishi Sunak is “kidding himself” if he believes the problem is temporary, as calls were made for longer term changes to the social security system.
The Chancellor’s package of targeted Government support unveiled on Thursday includes a £650 payment to more than eight million low-income households on Universal Credit, Tax Credits, Pension Credit and legacy benefits, with separate one-off payments of £300 to pensioner households and £150 to people receiving disability benefits. These groups are among the most vulnerable to rising prices.
Households will also receive a £400 discount on their energy bills from October.
Sarah Coles, senior personal finance analyst, Hargreaves Lansdown said: “Unfortunately the sheer scale of energy price rises mean that despite the support announced today, a huge number of families will still face enormous challenges in making ends meet.”
She added: “What’s more, by waiting until October to provide the energy grant, there’s a real risk that people’s financial resilience will be completely exhausted by then.”
The Resolution Foundation think tank highlighted risks that families who come into the benefit system after cut-off dates for measuring eligibility – for example if they lose their job – may miss out.
It said some groups will do better from lump sum payments than others, as flat payments do not reflect different levels of need within the benefit system or different levels of energy usage.
The biggest group to lose out from the approach of lump sum payments versus benefits uprating are families with children, with large families facing the greatest risks of severe fuel stress this winter, the Foundation said.
"The Chancellor has announced a big and very welcome package of support for households facing fast rising energy bills.
"It almost doubles the level of support to over £30 billion, and fills the gap in previous announcements with large targeted support for those hit hardest." pic.twitter.com/TgRtalOHpi
— Resolution Foundation (@resfoundation) May 26, 2022
Torsten Bell, chief executive of the Resolution Foundation, said: “The decision to provide one-off payments this year to poorer households, pensioners and those with a disability is a good attempt to target those with higher energy bills – although the relative lack of support for larger families stands out.
“The Chancellor’s commitment to uprate benefits next April in line with very high inflation also offers important security for lower income households that their living standards will be protected from surging prices tomorrow as well as today.”
The Institute for Fiscal Studies (IFS) also said there was a “crudeness” to the measures, with the flat rate amounts applying in full to those entitled to very little in benefits, and yet not at all to those whose income was very slightly too high to be entitled, meaning significant inequity in the treatment of very similar families.
The state pensions triple-lock would also be reinstated.
The triple-lock guarantees that pensions grow in line with whichever is highest out of earnings, inflation or 2.5%, but the earnings element was temporarily suspended for 2022/23 due to the distorting impact of the coronavirus crisis on wages.
The help the Chancellor has announced so far for people on low and modest incomes is nowhere near enough.
It’s simple – they won’t be able to make ends meet without considerably more government support.
— Age UK (@age_uk) May 26, 2022
Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown said: “The Chancellor did confirm the pension triple-lock would be back next year and added if inflation remains high then pensioners will receive a further boost, but… that is not until next April and many pensioners will need to battle through a winter where their costs will likely soar.”
Steven Cameron, pensions director at Aegon said: “The state pension increased in April by only 3.1%, after the triple-lock formula was amended, far below inflation which is now running at 9%.
“Had the state pension been increased by this amount, someone entitled to the full rate would have been receiving a weekly state pension of £195.75 a week, £10.60 above the actual level of £185.15. This leaves an individual’s purchasing power £551.20 a year less.”
Mr Cameron said the “good news” is that payments being made to the poorest pensioner households “will more than compensate for this”.
Caroline Abrahams, charity director at Age UK said many poorer pensioners are currently missing out on Pension Credit, adding: “We know that some three-quarters of a million are missing out at the moment, so we urge anyone who thinks they may be eligible to put in a claim without delay.”
"If the chancellor is serious about supporting those who are struggling then he will need to make long-term changes to the structure of the social security system and restore the value of benefits to something that families can really live on" 3/3
— Child Poverty Action Group (@CPAGUK) May 26, 2022
Christians Against Poverty’s director of external affairs, Gareth McNab, said the charity is dealing with some households with much higher deficits than the amount of support offered in the package, adding: “The simple truth is that while more generous, even these payments will fail to keep many out of destitution.”
Imran Hussain, director of policy and campaigns at Action for Children, said: “The measures announced today will help, but won’t fully shield families with children from the pain they’re experiencing.
“With more mouths to feed, more rooms to heat and more clothes to wash, families with children feel price rises the most and are at greatest risk of falling into poverty.
“Ultimately, we need a stronger social security system to ensure all families with children can meet their basic needs.”
Alison Garnham, chief executive of Child Poverty Action Group said: “The Chancellor is kidding himself if he thinks that the problem is temporary or that the package he offered today will stop people finding themselves so far back that they never recover.”
Unite general secretary Sharon Graham said: “We need a windfall tax on all those who have profited while people have suffered, not just energy firms.”