Why you're worried the £301 cost of living payment isn't enough

A customer shops for food items inside a Tesco supermarket store in east London on January 10, 2022. - UK annual inflation rocketed last November to 5.1 percent, more than double the Bank of England's 2.0-percent target -- price rises for fuel, clothing, food, second-hand cars and increased tobacco duty all helped drive up inflation. (Photo by Daniel LEAL / AFP) (Photo by DANIEL LEAL/AFP via Getty Images)
Recent figures found that food prices are rising at more than 19% year-on-year. (AFP via Getty Images)

With food prices seeming to rise almost daily and energy costs still running at record levels, households on low incomes are struggling to cope.

Last month, charities even reported how more people were “contemplating suicide” because of the financial difficulties they face.

The government has finally sent out its first cost of living payments to help the poorest households – but will it be enough? Yahoo takes a look.

What has the government done to help this week? On Tuesday, the government paid out a sum of £301 to more than 8 million families. It is the first in a series of three payments to help people cope with the cost of living crisis during the 2023/24 financial year, totalling £900 over the year, and will arrive in bank accounts by mid-May.

Who is eligible? Anyone on means-tested benefits – including universal credit, pension credit and tax credits – will receive the three payments. They don’t have to do anything to apply for it, and it will be paid in the same way as their benefits.

Can they spend it on anything they like? Yes, the payment comes as cash in the bank and it can be spent as the recipient chooses. However, with high energy prices and food costs rising rapidly, the vast majority of families are expected to use it to help pay essential bills.

Price rises in past 12 months. (PA)
Price rises in past 12 months. (PA)

Why is the rising cost of food such a concern? Recent figures from the Office for National Statistics found that food prices are rising at more than 19% year-on-year, the fastest increase since the 1970s. Last year more than 2.7 million people were reliant on food banks to feed their families.

UK Inflation rate. (PA)
UK Inflation rate. (PA)

Hang on, didn’t I hear that inflation is now falling? It is, very slightly, but it’s still running far higher than economists predicted. Inflation measured by the consumer prices index, which includes the cost of food, fell from 10.4% in February to 10.1% in March, but the forecast had been that it would drop to 9.8% last month.

So will the government’s cost of living payment be enough to cope? Possibly not. Campaigners say means-tested benefits are already too low to cope with basic household costs in today’s economy, so a quick top-up won’t help. More than 90 organisations have written to the government together to warn that almost all low-income households claiming universal credit are now routinely going without essential items.

Like what? As well as food and energy, people on benefits do not have enough to cover the cost of clothing, travel, childcare, water and other utility bills, and any emergency household costs that arise.

What should be done instead? The coalition of charities and campaign groups, which includes the Joseph Rowntree Foundation and foodbank provider the Trussell Trust, say the universal credit rate for a single adult, which is £85 a week, is at least £35 too low to cover only essential costs. They are calling for a reform of the benefits system so the basic payments always meet these needs.

Will the government do that? Not likely, however they may be forced to rethink their cost of living payments, especially if the cost of food continues to rise. The cross-party Treasury committee of MPs has criticised the three payments for having a “cliff edge” cut-off, leaving those just outside the eligibility criteria missing out on extra support despite being on lower incomes and struggling to meet the cost of essential bills.