Cost of Living Bill: economic background
Summarises recent economic trends which informed the development of the Cost of Living (Tenant Protection) Scotland Bill, which was introduced to the Scottish Parliament on 3 October 2022.
4. Trends in benefits
For those households who depend partly or fully on benefit income, the situation is even more challenging. The UK Government uprated allowances on reserved benefits in April 2022 using the September 2021 inflation rate, which at 3.1% is significantly below the 10% inflation rate currently being experienced. Table 6 and Figure 5 show the change in the real value of the maximum value of universal credit awards. These show substantial reductions, both due to the level of uprating, and also due to the decision to reverse the uplift to Universal Credit that was introduced during the initial stages of the Covid-19 pandemic.
| Family type | % change | Loss in real value in month |
|---|---|---|
| Single parent < 25, 2 children | -15.7% | -£136 |
| Couple < 25, 1 child | -16.9% | -£130 |
| Single > 25, no children | -25.9% | -£107 |
| Couple > 25, 3 children | -13.6% | -£151 |
Sources: Scottish Government analysis of Universal Credit rates, deflated using the ONS Consumer price inflation.
Source: Internal SG analysis.
The Scottish Government uprated most devolved benefits by 6% in contrast to the UK Government’s 3.1%, but despite this additional protection, the spike in inflation means that the value of these benefits has also fallen in real terms, albeit by less than reserved benefits (Figure 6).
Source: Internal SG analysis.
With respect to housing benefit, or the housing element of universal credit, it should also be noted that Local Housing Allowance rates, which set the maximum amount of rent that can be covered by benefit payments, have been frozen by the UK Government for two years, after having been reset to the 30th percentile during the initial stages of the Covid-19 pandemic.
Contact
Email: Bruce.Teubes@gov.scot
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