Why inflation increase is 'extremely unfair' to people on universal credit

Millions of families claiming universal credit will be left significantly worse off next year as a minor increase in benefit payments looks likely to be wiped out by inflation.

The government has been met with a barrage of criticism for baking in an "inbuilt shortfall" into the universal credit rise after it decided to uprate the payments by 1.7% in line with September's inflation rate, when the figure was at its lowest in more than three years.

Since that date, inflation has risen month-by-month, hitting 2.6% in November.

Here, Yahoo News UK tries to make sense of the situation and what it could mean for universal credit recipients.

How much will universal credit increase in 2025?

Based on the CPI measure of inflation in September, the DWP confirmed an 'uprate' of 1.7% for universal credit to come into force from April 2025.

At the lowest end of the scale, this will mean the monthly payment to a single person aged under 25 will rise by just £5.30, from £311.68 to £316.98.

Joint claimants both aged 25 and over will be eligible for £628.10 - an increase of £10.50.

Why is the uprate going to be so small?

The 'business as usual' approach of the DWP is to set the annual uprate at the rate of inflation in September.

According to Iain Porter, senior policy advisor with the Joseph Rowntree Foundation (JRF), this is because of the sheer amount of time it takes DWP administrators to roll out the new payments.

"It's done quite far in advance, but the DWP has a lot of older systems, so it takes a lot of time to make all the changes," he told Yahoo News UK.

"Once that has been announced, that will almost certainly be applied from April."

The government can, of course, decide not to apply the usual rate of inflation, as the previous Conservative administration did when it applied its so-called 'benefits freeze'.

The shift in recent years to the universal credit system was also supposed to improve the efficiency of payments.

"There's no reason they couldn't use, say, the December inflation rate, which would make sure inflation would match a bit better," Mr Porter said. "But the system we have is the system we have. That caused problems a few years ago when we had such a surge in the cost of living."

What has the reaction to the uprate been?

The decision to base the uprate on the September rate of inflation, which fell to a three-year low before rebounding almost immediately, has been widely criticised.

Porter, from the JRF, said: "It's extremely unfair when you have millions of families on these payments.

"We know universal credit is a newer system which could be uprated more quickly and which would be fairer to claimants.

"But, to be honest, the bigger issue is not how much it goes up by, but the actual level universal credit is at.

"It's about £91 per week at the moment - the minimum a person needs to afford essentials is probably more like £120 per week. There is an in-built shortfall."

Reacting at the time the uprate was announced, the Resolution Foundation called the move "badly timed" and urged the government to "address the age divide in benefits which has left working-age support fall further behind rising wages and living standards".

When contacted, the DWP referred Yahoo News to a press release related to the Budget dated 31 October.