Iain Duncan Smith says government must help poor by increasing Universal Credit

Former Conservative Party leader Sir Iain Duncan Smith has called for benefits to be immediately increased in line with inflation to help people with the mounting cost of living.

Sir Iain said rebates and discretionary funds offered by the government were “a step in the wrong direction for tackling poverty”, arguing it would be better to uplift Universal Credit (UC) as it “links benefits to work”.

It comes after prime minister Boris Johnson said he could not “magic away” all the soaring food and energy expenses, as he came under increasing pressure to help people more with rising costs.

UC payments rose by 3.1% in April, in line with the Consumer Prices Index (CPI) rate of inflation in the year to September 2021.

Meanwhile, CPI inflation rose to 9% in the year to April, Office for National Statistics (ONS) data signalled on Wednesday, up from an already high 7% in March.

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Sir Iain, also a former work and pensions minister, called for a "special fiscal event", in effect an emergency budget.

"I don't think we can afford to wait until later in the year. I think that will begin to look complacent," he told BBC Radio.

"People need to see that we care enough to act immediately and I would recommend that the government pauses and then acts big, it acts boldly and it's brave about this because we have one responsibility - to help those who desperately need it most."

The recommendation to bring benefits in line with inflation is set out in a new report from the Centre for Social Justice (CSJ) – a think tank founded by Sir Iain in 2004 – calling for it to be funded by above-forecast tax receipts.

The government is giving £150 council tax rebates for many homes and will take £200 off energy bills from October, which is repayable in a loan over five years.

But campaigners say this will not be enough for many people.

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In its report, the CSJ says the government should consider reviewing the rate of benefits quarterly, rather than annually, at least as long as the “current period of unusual inflationary pressure” lasts.

The think tank says the first increase should come at the end of June.

It claims that bringing UC in line with inflation would see over four million households gain an average of £729 extra support to stave off the cost-of-living crisis over the coming year.

As part of its package of recommendations, the CSJ is also calling for an increase in UC work allowances, which would provide “an effective tax cut” for 1.66 million poorer, working households, worth £733 million, or on average £442 each.

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The CSJ also wants the government to suspend UC debt repayments for six months and forgive historical debts “born of design issues in the legacy benefits system”.

Last week, Mr Sunak said he was not able to raise the payments more than 3.1% due to an old computer system that the Department for Work and Pensions uses.

The Institute for Fiscal Studies economic think tank has suggested that the poorest households face inflation of 10.9%.

This is higher than average because they spend a larger portion of their money on heating and lighting their homes.

A government spokesperson said: “We recognise the pressures on the cost of living and we are doing what we can to help, including spending £22 billion across the next financial year to support people with energy bills and cut fuel duty.

“For the hardest hit, we’re putting an average of £1,000 more per year into the pockets of working families on Universal Credit, have boosted the minimum wage by more than £1,000 a year for full-time workers and our Household Support Fund is there to help with the cost of everyday essentials.

“We also know that people are at least £6,000 better off in full time work than on benefits, so we are redoubling our efforts to help people find work and progress.”