interactive investor comments on benefit uprating

Vulnerable consumers face benefits cut in real terms if payments are not uprated in line with inflation.

Commenting, Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “With the Conservative party conference this week stirring even more debate about benefits and whether they should go up in line with wages or inflation, England’s county councils have now waded in, warning of pressure on services.

“Raging inflation means that the nation’s most vulnerable consumers are facing a cut in benefit payments in real terms, so this is another huge issue.  

“But upping benefit payments in line with inflation could be a bone of contention among low-paid workers who just fall outside the benefits system. This group is likely to have seen any uplift in their pay packet obliterated by inflation. Annual growth in regular pay, excluding bonuses, fell by 2.8% in the UK after taking account of inflation over the latest three-month period to July 2022 – which is among the largest falls since comparable records began in 2001, according to official statistics.

“It is thought that the decision on uprating won’t be implemented until April – although with so much uncertainty in the air, which isn’t helpful for anyone - let’s see how that plays out in reality. The hope is inflation would have subsided considerably by then – but there are no certainties. Millions of the nation’s poorest households will start to receive the second half of their £650 cost of living payment from 8 November. Every little helps in this unprecedented cost-of-living crisis, but for many, the payment will only scratch the surface of what is needed.

“For those who can, it remains important to take steps today to bolster financial resilience now to give you some peace of mind in the coming months.”

Alice Guy, Personal Finance Expert, interactive investor, says “Those on benefits are the worst affected by the cost-of-living crisis as they have less money to spare for extra bills. Many will face extreme hardship if benefits aren’t raised in line with spiralling inflation.

“There’s an underlying assumption that those on benefits can get back into work. But many are out of work through no fault of their own, with disabilities, long-term health issues or caring responsibilities.”