People on universal credit could be up to £670 worse off next year even if benefits are increased in line with inflation, analysis has found.

An assessment by think tank the New Economics Foundation, conducted following the announcement that inflation remained unchanged at 6.7% in September, shows many households are facing the prospect of further struggles as uncertainty over future support continues.

The analysis found that if cost-of-living payments end, by April next year 40% of all families would fall short of the “minimum income standard” – a widely used benchmark for a decent standard of living after housing and childcare costs.

This proportion is in line with the think tank’s findings in 2022, but represents an increase of 10 percentage points since 2019.

Rishi Sunak visit to Clacton Library
Rishi Sunak has defended the Government’s cost-of-living support, but has not committed to further payments for people on benefits (Frank Augstein/PA)

Meanwhile, the incomes of the poorest quarter of households are set to fall £430 below the minimum standard in the coming months.

The financial support available to a single person over 25 in universal credit would decrease by £670 in April 2024 compared with the same time last year.

In the same circumstances, a single parent with one child on universal credit would experience a drop in income of £350, while a couple over 25 with two children will see their benefits increase by just £35, the analysis found.

Eligible people on means-tested benefits will receive three cost-of-living payments this year totalling £900 by November, but the Government has not confirmed whether they will continue.

In a joint open letter to Conservative MPs, charities said they are “deeply concerned” by reports Chancellor Jeremy Hunt might raise benefits by a lower figure – a decision they warned would have an impact on millions of low-income families.

Sam Tims, senior economist at the New Economics Foundation, said: “The social security system should provide a safety net for us all but universal credit is leaving people without enough to afford the essentials like food and clothes.

“Raising benefits in line with inflation should be a guaranteed bare minimum, but in practice all it means is that rates are returned to an inadequate baseline that does not reflect the actual costs people face.

“If the government proceeds with cutting the cost-of-living payments, low income households will fall even further behind. The government must commit to ensuring that, at the very least, benefits cover people’s essential costs.”

ECONOMY Inflation
(PA Graphics)

Responding to a question on poverty during Prime Minister’s Questions on Wednesday, Rishi Sunak said: “I am proud of our record supporting people with the cost of living.

“Thanks to the actions we have taken, we have paid half of the typical family’s energy bill last winter, frozen fuel duty and boosted the national living wage to record levels, and eight million people across the country are now receiving direct cost-of-living payments worth £900.”