Autumn Statement plot to move Universal Credit goalposts could cost families £500 a year

A Tory plot to move the goalposts on how benefits are calculated could hit the incomes of nine million families by as much as £500 a year.

Chancellor Jeremy Hunt is rumoured to be considering slashing the welfare bill by around £1.3 billion by not increasing benefits in the usual way.

Currently working-age benefits - like Universal Credit and child benefit - go up every April by the level of inflation the previous September. That means the poorest families always have the value of their income protected against inflation.

This year, Mr Hunt is said to be planning to calculate the increase based on October’s inflation figure - which fell to 4.6% from 6.7% in September, the biggest monthly fall in over 30 years. Analysis by the Resolution Foundation shows that the average annual income loss for families affected by this benefit cut is £142, but many low-income working families on Universal Credit would face far greater losses.

Figures suggest a working family with three children could lose as much as £500 a year if it were calculated this way. Louise Murphy, Economist at the Resolution Foundation, said: “Benefits are usually increased in line with prices every year in order to ensure that families who receive support do not see their living standards fall.

“But the big fall in inflation between September and October this year has led some to suggest the government should move the goalposts on benefits uprating, and save around £1.3 billion. This benefit cut would mean an income loss for nine million families, with some losing up to £500 next year.” She added: “The context for this important decision facing the Chancellor is a cost of living crisis that is really a cost of essentials crisis, as energy and food bills have soared. Tough times for everyone are already toughest for low and middle income Britain.

A DWP spokesman said: “We increased benefits by over 10% this year in order to protect the most vulnerable from the impact of high inflation. As is the usual process, the Secretary of State will conduct his statutory annual review of benefits and State Pensions using the most recent data available.”