The implications of 1% uprating
Nicola has explained why getting rid of benefit uprating requires new legislation. As she says, this could easily have a huge impact on living standards, bigger than anything else in the Autumn Statement. I’ve tried to work out what this is likely to mean in practice and it looks as though, in just three years, single unemployed people will lose £2.85 a week compared with the uprating policy we have now and £3.85 compared with the policy we had before 2010.
In the table below we start off with the Jobseeker’s Allowance for a single person aged over 24 in 2012 – 13. The current uprating rule is that benefits rise in April in line with Consumer Price Index inflation the previous September; until the current government took power the increase was in line with the Retail Price Index. The CPI then was 2.2 per cent and the RPI was 2.6 per cent. The practice has been to round the increase up to the nearest 5p.
The first row shows uprating in line with RPI, the second CPI and the third by 1 per cent. The 2013-14 column shows increase for actual CPI and RPI in September 2012. For the next two columns, I have used the Office for Budget Responsibility’s forecast CPI and RPI inflation in the year before.
A loss of £3 or £4 a week may not sound much to most people with jobs. That is because, contrary to the Chancellor’s argument this afternoon, most of us are substantially better off than most unemployed people. Jobseeker’s Allowance is so low that these sums add up to a high proportion of a claimant’s entitlement – up to 5 per cent. We all know how compound interest works, but even so I was shocked when I realised that the policy announced today would have this impact in just three years. If the planned Welfare Uprating Bill sets this policy in stone “for many years”, as the Chancellor said, the implications for the poorest people in the country will be immense.