Autumn Statement: Benefits to increase by 5.2% next year
Most working-age and disability benefits will be increased in line with inflation (measured using the consumer prices index) next year, Chancellor George Osborne has revealed.
This means an increase by 5.2%, way ahead of the current average pay rise in the UK.
Delivering his Autumn Statement, Osborne said: "The government will ensure that the welfare system remains fair and affordable while protecting the most vulnerable in society."
However, the government will not go ahead with the planned £110 above inflation increase to the child element of the Child Tax Credit.
It also won't increase the couple and lone parent elements of the Working Tax Credit in 2012/13.
The chancellor said this is to ensure the welfare system remains affordable.
In addition to these changes, the Osborne also announced that the government will invest a further £380 million a year by 2014/15 to double its offer of 15 hours of free childcare a week for the most deprived two-year-olds in England.
A total of 260,000 children will be covered under the scheme – equating to 40% of two-year olds in the UK.
Mark Jones, head of protection at LV=, says: "Parents are all too aware that having a child comes with a hefty bill, especially when looking at the cost of childcare.
"The government scheme will be a welcome benefit for the families struggling most to meet the high costs of childcare."
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).
The Consumer Price Index is the official measure of inflation adopted by the government to set its target. When commentators refer to changes in inflation, they’re actually referring to the CPI. In the June 2010 Budget, Chancellor announced the government’s intention to also use the CPI for the price indexation of benefits, tax credits and public sector pensions from April 2011. (See also Retail Prices Index).
Child tax credit
A scheme started in 2003 that sought to replace a raft of other tax credits and benefits, the payout depends on the number of dependant children in a family, and its level of income. The amount of credit is reduced as income increases. It is payable to the main carer of a child, usually the mother, and is available whether or not the recipient is working.