Families struggling to make ends meet due to the rising cost of living could be entitled to an emergency boost to their Universal Credit payments in excess of £700 due to a new emergency lifeline.
Chronicle Live reports The Centre for Social Justice (CSJ) has asked Policy in Practice to investigate the costs and consequences of three options to enable the benefit to get a much-needed boost as the cost of living continues to rise.
One option would see an increase in DWP benefits as if they were granted a 10% rise in April 2022, as opposed to the 3.1% that was granted at the time.
If the plan was put into action it would set the Government back by £3.1 billion by offering 4.2 million households an average of £729 a year, which equates to an extra £60 a month.
The CSJ claims the second option would be to bring back the Universal Credit uplift. The scheme saw an extra £1,000 a year given to claimants over 18 months at the height of the pandemic. It's reported that bringing this back in would cost £4.2 billion.
But the Government has stated previously that the uplift was only ever a temporary aid, and the CSJ has claimed that the £729 increase is likely to be viewed as the preferred option as it "lowers the cost to the Treasury, if this is a concern – it is a sensible alternative to restoring the £20 uplift."
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There is also a third suggestion on the cards, which is to reinstate work allowances to 2015 levels. This would mean 1.66 million households who are both in work and on Universal Credit would gain advantage from a policy costing £733 million.
On average the gain would equate to £442 per year for each household in work.
A work allowance is the total of benefit that working claimants are able to keep – for every £1 in wages above the level of that allowance, 55p of benefit is taken away.
The allowances only apply to people who care for a child or have limited time to work. The rate of deduction once stood at 63p in the £1, but this was decreased in December 2021.
In a report, the Centre for Social Justice – a think tank founded by former Tory leader Sir Iain Duncan Smith – said: "While the decision to cut the UC taper in the Autumn Budget put £1,000 back into the pockets of 1.9 million households, much of its value will be wiped out by inflation. And it will do nothing to protect those who are not in work.
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"With UC only uprated by 3.1% in April, those who rely on welfare for their income will experience a 7% cut. To prevent this, the Chancellor and Secretary of State for Work and Pensions should implement an emergency in-year uprating, bringing UC into line with inflation to ensure it covers the true cost of living."
Sir Iain claimed rebates and discretionary funds represent "a step in the wrong direction for tackling poverty", and argued it would be wiser to uplift Universal Credit (UC) as it "links benefits to work". The suggestion comes after Boris Johnson said he cannot "magic away" the ever-rising prices of bills, as pressure was put on him to help people who are suffering the brunt of the cost-of-living crisis.
The Government is currently offering £150 council tax rebates for several homes, and is also set to deduct £200 off energy bills from October.
Despite this campaigners claim the help just won't be enough for some people, as even though benefits saw a 3.1% increase, inflation now stands at 9%.
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CSJ also says the Government should think about reviewing the rate of benefits quarterly, as opposed to annually, in its report.
It's suggested this should be done at least until the "current period of unusual inflationary pressure" continues. According to the think tank, the first hike should come in towards the end of June.
The CSJ is also calling on the Government to suspend UC debt repayments for six months, and to excuse historical debts "born of design issues in the legacy benefits system".
As well as this, it's also thought that environmental levies should be absorbed into general taxation, and the energy price cap should be looked at quarterly as opposed to every six months "to avoid cliff-edges in prices."
Around a week ago, Chancellor Rishi Sunak stated he was unable to increase payments by more than 3.1% due to an old computer system that the Department for Work and Pensions uses.
The Institute for Fiscal Studies economic think tank indicated that the poorest households could be facing inflation as high as 10.9%. It's reported to be higher than normal due to the fact that they spend a big chunk of their earnings on heating and energy bills.
Chronicle Live contacted the Treasury and the Department for Work and Pensions (DWP) for comment.