Benefit claimants will see their payments boosted next year in a move that could cost the Government up to £5.5bn, according to the Institute for Fiscal Studies (IFS). 

Some 10 million Britons people claiming working-age benefits are set to see a rise of at least 3.5 per cent from next spring, with ministers expected to increase rates in line with inflation.

The Department for Work and Pensions (DWP) has confirmed that it will not freeze benefits, with the uplift rates set to be confirmed in the Budget on Wednesday.

Disability and carers’ benefits – such as personal independence payment (PIP) and carer’s allowance – must rise at least in line with inflation. However, ministers can decide whether to raise, cut or freeze most other working-age benefits, such as child benefit.

What it means in pounds and pence

Leading think-tanks, the Resolution Foundation and IFS, have said they expect the Government to proceed with uprating benefits according to the Office for National Statistics (ONS) inflation figures for September. However, the final decision will be up to the Chancellor.

The Resolution Foundation said that, from April, the standard allowance in Universal Credit for a single person over 25 will rise by 4.3 per cent (or £4.23) to £102.28 a week. It will rise by £6.63 to £160.55 a week for couples. It rises faster than inflation due to a law passed last year to rebalance benefit payments and help the poorest.

This would mean a single person under 25 on universal credit could see a rise of £150 a year, while a couple over the age of 25 will see their payments rise by nearly £350 a year.

Most other working-age benefits will rise by 3.5 per cent, including Child Benefit which will increase by £0.95 to £28 a week for the first child and by £0.65 a week to £18.55 for each additional child, according to the think tank’s analysis.

Tom Wernham, senior research economist at the IFS, said that with the entire working-age benefits bill expected to cost just under £160bn this year, a 3.5 per cent uplift from April is likely to cost the Treasury “somewhere in the ballpark of £3.5bn”.

“This is around £2.2bn more than would have been expected based on the OBR’s inflation forecasts at the Spring Forecast,” he said.

Wernham noted that this could be an “overestimate” because some benefits are frozen, including the benefit cap, which limits the overall amount of benefits families can receive, and the threshold for how many savings or other assets you can have before losing your benefits.

Benefit claimants may also see further energy bills support announced in the Budget, but it remains to be seen how much this could be and who would be eligible. There have been calls for support to go to more families beyond the existing Warm Homes Scheme, which offers those on means-tested benefits £150 off energy bills.

Nurses, doctors and teachers ‘face real-terms pay cut’

It comes as nurses, doctors and teachers face pay awards that risk leaving them worse off as the cost of living climbs, according to trade unions.

Ministers have warned that giving NHS staff a pay rise above 2.4 per cent next year could hit patient care, saying every extra half a percentage point would cost around £750 million – the equivalent of more than 89,000 hip or knee replacement operations.

The Government says its plans for 2027-28 can accommodate a 2.4 per cent increase without trade-offs against its main health commitments, but any bigger award would have to be funded from existing budgets.

Teachers, meanwhile, have been awarded a 3.5 per cent pay rise – while in line with inflation, unions argue it is below the 3.9 per cent Retail Prices Index (RPI) rate of inflation. This is an older measure of inflation that generally tracks higher than the Consumer Price Index (CPI), on which inflation is set, as it includes housing costs. Unions warn that the deal therefore amounts to a real-terms pay cut.

NASUWT General Secretary Matt Wrack told The i Paper: “The RPI inflation figure of 3.9 per cent makes it clear that the Government’s partly-funded 3.5 per cent pay award for teachers is now a real-terms cut.

“When schools are already struggling with rising costs and a recruitment and retention crisis, ministers should not be expecting teachers to take yet another hit to their living standards.

“This is essential to help stabilise the education workforce and protect education. The Government must urgently revisit this award and commit to a fully-funded pay rise that reflects the reality teachers are facing.”

A DWP spokesperson said: “We want to build a welfare system that incentivises work and supports those who need it most, but the system we inherited denied people the support and opportunities they need to move into work.

“We are already changing the system through the Youth Guarantee, narrowing the gap between Universal Credit standard and health rates, restoring face-to-face assessments, and investing a record £3.5 billion in employment support for disabled people and those with long-term conditions.

“The Secretary of State for Work and Pensions is required by law to undertake an annual review of the State Pension and working-age benefits, and final figures will be confirmed once this is finished.”