You could be £1,100 a year worse off from Friday in cost of living surge

Typical working-age families will be £1,100 per year worse off after the cost of living crisis accelerates this Friday, analysts have warned, but the prime minister insists work is still the best route out of poverty. 

The energy price cap will rise by 54 per cent on April 1 – taking average bills to around £3,000 per year – alongside national insurance payments increasing by 1.25 percentage points and benefits rising by less than half of current record-high inflation.

Around 1.3 million people will fall into absolute poverty over the next year as a result, Resolution Foundation research showed, including 500,000 children. It will be the sharpest rise in poverty ever seen in Britain outside of recessions.

Asked by MPs why the recent 350-page levelling up white paper did not once mention addressing child poverty, Boris Johnson said this was a “purely formal accident”.

While giving evidence to Westminster’s liaison committee, the prime minister was grilled on the government’s refusal to tackle the cost of living crisis through the social security system in order to target the most disadvantaged households.

Johnson cited the increase in the universal credit taper rate – meaning people in work who receive the benefit get to keep more of their earnings – which was announced in October, the same week payments were cut by £20 per week.

“You’re better off helping people into work,” the prime minister told MPs. “I know there are many difficult cases but that’s why we’re doing the council tax support [a £150 loan for households this April in the face of soaring energy bills], doubling household support payments, we’re doing all sorts of things to help people.

“You have to decide where you’re going to put your fiscal fire power given that we don’t want to put up taxes and we don’t want to borrow any more.”

In his Spring Statement, Chancellor Rishi Sunak announced the Household Support Fund would double from £500 million to £1 billion, allowing councils to continue supporting local households struggling with bills. The amount of these payments was not mentioned, however, despite Johnson’s claim of “doubling household support payments”.

Stephen Timms, chair of the Commons work and pensions committee, warned against leaving those who can’t work to fall through the gaps of support.

They are seeing a “massive squeeze” on finances, Timms said, asking Johnson if he had “lost confidence” in universal credit.

“Not at all,” the prime minister said.

“There are 1.8 million people currently getting benefits [who the government believes is fit to move into work]. There are 1.25 million job vacancies. Go figure.

“We’ve got an economy which is massively short of hands,” Johnson added. “We need to get those people off benefits and into work, and that’s by far the best thing for them.”

The government has previously been accused of “degrading” health assessments for sick and disabled people to prove they need state support, with some reporting that final reports did not reflect what they told assessors about their condition. 

Chancellor Rishi Sunak resisted campaigners’ calls to increase social security payments by at least six per cent in last week’s Spring Statement, despite soaring inflation predicted to reach as 8.7 per cent.

Sunak confirmed benefits will only increase by 3.1 percent, in line with inflation figures from September 2021, telling MPs his focus is on cutting taxes rather than public spending.

This week also marks the end of universally free lateral flow tests in England as well as a rise in social housing rent costs.

“The decision not to target support at those hardest hit by rising prices will leave low-and-middle income households painfully exposed,” said Torsten Bell, chief executive of the Resolution Foundation.

The chancellor has “prioritised rebuilding his tax-cutting credentials” over supporting low and average earners who will be hardest hit by the surging cost of living, Bell added.

“Whether that will be sustainable in the face of huge income falls to come remains to be seen.”