If the government increases benefits in accordance with earnings instead of inflation next year, it will reportedly reduce the incomes of poor working-class families significantly while only saving less than a tenth of the cost of current tax reductions, as per a renowned economic thinktank.
According to the Resolution Foundation, such a move may result in an annual reduction in some households' effective income by up to £1,000 ($1121.69) and represent a large real-term loss given that salaries are only increasing at a rate of 5.5%, while inflation is hovering around 10%.
According to the report, this choice would ultimately save nearly £3 billion ($3.3 billion) by 2026–2027, while the estimated cost of the tax cuts proposed in chancellor Kwasi Kwarteng's mini-budget would cost around £40 billion ($44 billion), even now, after overturning the top 45p rate of tax.
While the so-called triple lock update, which was halted last year, calls for governments to increase pensions in tandem with inflation, they have not yet decided if the same will hold true for benefits for people of the working class.
Business Secretary Jacob Rees-Mogg stated on Wednesday that no action would be taken prior to the upcoming publishing of inflation numbers, which is scheduled for next week. Many Conservative MPs, including other members of the government, are in favor of a raise that keeps pace with inflation.
The foundation also claimed that if working benefits like universal credit are increased at an earning-linked rate, it would affect 9 million or 45% of households, including the working-age populace.
The consequences would differ greatly. According to the analysis, a family with a single child who only receives child benefits would lose £52 ($58.53) annually, while a physically challenged adult single receiving UCC would lose £380 ($425.92).
Low-income households with children would be the ones who would be most impacted. It stated that a working family with three kids would lose £978 ($1100.80) annually.
Source credit: https://www.theguardian.com/society/2022/oct/13/poorer-families-risk-1000-hit-from-earnings-related-benefits-rise