The former Conservative leader Sir Iain Duncan Smith has called for benefits to be immediately brought in line with inflation to provide a “shield” against the sting of mounting living costs.
He said rebates and discretionary funds represented “a step in the wrong direction for tackling poverty”, arguing it would be better to uplift universal credit (UC) as it “links benefits to work”.
The recommendation is one of several set out in a report from the Centre for Social Justice (CSJ), the thinktank founded by Duncan Smith, calling for a “special fiscal event” funded by above-forecast tax receipts.
The CSJ claims that bringing UC in line with inflation would give more than 4m households an average of £729 extra support over the coming year.
It said the first increase should come at the end of June and the government should consider reviewing the rate of benefits quarterly, rather than annually, at least as long as the “current period of unusual inflationary pressure” lasts.
UC payments rose by 3.1% in April, in line with the consumer price index rate of inflation in the year to September 2021. However, this week inflation hit a 40-year high of 9% in the 12 months to April, up from 7% in March.
The Institute for Fiscal Studies has suggested the poorest households could face inflation of 10.9% – higher than average because they spend a larger portion of their money on heating and lighting their homes.
The chancellor, Rishi Sunak, said last week he was unable to raise benefits by more than 3.1% because of an old computer system used by the Department for Work and Pensions.
The government is issuing £150 council tax rebates for many homes and offering a one-off repayable £200 discount on energy bills from October, but campaigners say this does not go far enough.
Duncan Smith said: “The CSJ is calling for a special fiscal event to tackle this crisis, and to provide a shield against the worst of inflation for those most struggling.
“Rebates and discretionary funds represent a step in the wrong direction for tackling poverty. UC links benefits to work, ensuring those that are able can move into and progress within employment.”
He added: “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.”