The Social Security (Additional Payments) (No. 2) Bill 2022-23 was introduced to the House of Commons on 7 February 2023. It provides for two Cost of Living Payments announced as part of a wider package of support for households in 2023/24 announced in the 17 November 2022 Autumn Statement.
The payments are:
- a £900 Cost of Living Payment, referred to in the Bill as “means-tested additional payments”. These are paid in three instalments, to recipients of certain means-tested benefits including Universal Credit, most of the legacy benefits and tax credits it is replacing (except Housing Benefit), and Pension Credit.
- a £150 Disability Cost of Living Payment referred to in the Bill as “disability additional payments”. These are for recipients of certain non-means-tested disability benefits, including Personal Independence Payment (PIP), Disability Living Allowance (DLA), Attendance Allowance (AA), and corresponding devolved Scottish disability benefits.
The Government also announced £300 Pensioner Cost of Living Payments and further funding for discretionary support through the Household Support Fund. These do not require new primary legislation.
Rising cost of living
The cost of living has increased sharply in the UK since early 2021. The annual rate of Consumer Price Inflation reached a peak of 11.1% in October 2022, a 41-year high. It has since eased and CPI inflation was 10.1% in January 2023.
Energy and food prices have risen particularly fast, disproportionately affecting lower income households who spend a greater proportion of their income on these items.
Issues with benefit uprating
The way benefits are increased, or “uprated”, to take account of inflation means the real value of benefits has lagged significantly behind prices during the period of higher inflation. This follows a long-term decline in the value of working age benefits in comparison to prices and earnings.
Current practice is to “uprate” benefits based on year-to-September inflation figures, with increases implemented the following April. The explanation successive governments have given for this significant gap is that it takes several months to apply uprating in the various systems used to operate benefits.
Higher inflation from Autumn 2021 onwards has prompted criticism of the way this lag erodes the short-term value of benefits. In both the 2022/23 and 2023/24 financial years, the uprating process has left the level of benefits (excluding Cost of Living Payments, which are separate) lower in real terms than before the inflationary spike, a situation that will last at least until April 2024.
Cost of Living Payments
Since 2022/23, significant government support for household finances has been announced in response to rising costs. This has been wide ranging, with universal programmes such as the Energy Bills Support Scheme, as well as measures targeted at groups seen as particularly affected or vulnerable.
Some universal interventions are not being repeated in the 2023/24 financial year. The largest temporary universal measure, the Energy Price Guarantee, is being scaled back from April, capping typical household energy bills at £3,000, rather than £2,500.
The main targeted measures in both 2022/23 and 2023/24 are Cost of Living Payments for recipients of certain benefits.
Further information can be found in the Library briefing Cost of Living Payments: Overview and FAQs.
Statistics and impact of Cost of Living Payments
Cost of Living Payments were estimated to cost £8.8 billion in 2022/23, and are expected to total over £11 billion in 2023/24. The further £1 billion for the Household Support Fund and for the devolved administrations for 2023/24 is the same in cash terms as the amount allocated in 2022/23.
In 2023/24, over 8 million households are expected to receive a means-tested benefit Cost of Living Payment, 6.7 million disabled people will receive a Disability Cost of Living Payment, and 11.7 million pensioners will receive an uplift to their Winter Fuel Payment. These groups will overlap.
Cost of Living Payments are “progressive” – disproportionately benefitting lower and middle-income households. This is because means-tested benefits, by their nature, are targeted at households with lower levels of income and savings.
Non-means-tested disability benefits also disproportionally benefit lower and middle-income households. This targeted approach, the Government argues, protects lower-income households, despite the scaling down of universal support for energy bills, while also reducing the overall level of spending to support households.
Issues and debates
Cost of Living Payments have been widely welcomed. However, there has been concern that certain groups in need may miss out on means-tested benefit Cost of Living Payments. These include low-income households not receiving means tested benefits, those getting Housing Benefit and no other qualifying benefit, and claimants who get a nil award of Universal Credit during the qualifying period.
Even when households do qualify for support, they may still face acute challenges due to rising living costs. Larger families on means-tested benefits, for example, receive the same level of support as a single person, despite often facing significantly greater costs.
For those not qualifying for cost of living support, and those with unmet needs despite receiving support, the Government emphasises the availability of the discretionary support from the Household Support Fund in England.
What does the Bill do?
The Social Security (Additional Payments) (No. 2) Bill 2022-23 provides for the means-tested benefit Cost of Living Payment and the Disability Cost of Living Payment to be made in 2023/24 announced by the Government in the 2022 Autumn Statement.
It also allows the Secretary of State, through regulations, to set qualifying dates for the payments.
It does not make provision for any of the other measures announced in the Autumn Statement, which are being implemented under separate legislative provisions.
The Bill’s territorial extent and application covers England and Wales, Scotland, and Northern Ireland.
Detailed commentary on the provisions of the Bill can be found in section 6 of this briefing and the Explanatory Notes accompanying the Bill.