RISHI Sunak is being urged to increase benefit payments for hard-up Brits ahead of his Spring Statement on Wednesday.
The Chancellor is under pressure to raise rates for Universal Credit and the State Pension among other payments as households face mounting costs.
Inflation is running at 5.5% and is expected to reach higher than 8% this year experts believe.
The annual uprating of benefit rates is based on inflation rates for September, before living costs started to spiral.
The 3.1% rise which comes into effect from April will leave households worse offin real terms.
Experts at the Resolution Foundation said although higher costs would likely be reflected in next year's rise, it "would leave the real value of social security falling significantly in the months ahead, before making up the lost ground next April".
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The think tank has called for a rise of 8.1% that "merely ensures that the value of benefits keep pace with price rises between April 2021 and April 2022".
The group estimates the cost of such a rise at £9billion, or £3billion if just Universal Credit and tax credits were included.
The higher uprating would provide four times more support to households on low and middle incomes compared to cancelling the hike in National Insurance planned for April.
Cancelling the NI rise "would see half the gains go to the richest fifth of households" according to the research, while increasing the uprating of benefits and the NI thresholds "would provide some badly needed respite for families in the year ahead".
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Resolution Foundation principal economist Adam Corlett warned that "rapidly rising inflation is on course to bring about the biggest income squeeze families across the UK have faced since the 1970s".
He added: "While fuel duty cuts to relieve pressure at the petrol pump will inevitably be part of the package announced this week, the main income support will need to come from either the tax or benefits system.
"Low-to-middle income households will be hardest hit by the cost of living squeeze, especially when the energy price cap rises and should therefore be the priority for support.
"Raising benefits by a further five percentage points would deliver four times as much for these families as cancelling the national insurance rise, and should be the Chancellor's top policy priority.
"But if Rishi Sunak is keen to demonstrate his tax-cutting credentials alongside raising benefits, then raising the national insurance threshold too would be the best route, as it is well targeted at middle income households."
Mr Sunak is set to deliver his spring mini-Budget in Wednesday (March 23) at around midday.
His Spring Statement is when he's expected to deliver updates on the economy and spending plans.
But with the cost of living crisis leaving households struggling the Chancellor is being urged to announce fresh help.
Speaking just before his spring statement on Wednesday, Mr Sunak hinted that he would cut fuel duty to help hard-pressed motorists.
He refused to rule out changing the threshold of National Insurance – meaning that lower paid could get taken out of the damaging tax rise to come.
Mr Sunak suggested upcoming extra help would target the very lowest paid and poorest Brits who needed it the most.
He slapped down calls for a VAT cut to energy, saying it wouldn't be "targeted" enough.
Cost of living crisis
Charities and economists are also among groups urging the government to increase the benefits uprating.
Martin Lewis yesterday said he was "virtually out of tools" to help struggling households and has called on the government to act.
Fresh research from debt charity Stepchange found 42% of people expect to struggle paying a regular bill like energy or council tax, and one in five believe they will get into debt they won't be able to pay back.
Phil Andrew, the charity's boss, said: “These figures make for grim reading and emphasise just how dire the coming months will be for financially vulnerable people.
"Without bold action from Government, more and more people face falling into problem debt, eating through hard-earned savings or going without the basics just to get by.
“Government must pull every lever at its disposal in order to protect those on the lowest incomes from the scars of debt and destitution.
The charity is calling on further support, including an expansion of the Warm Home Discount scheme and greater forbearance and support for people struggling with energy debt and arrears.
Last month the government announced that 80% of households will get £150 council tax rebate to help with rising energy bills.
A further £200 energy bill rebate will come in October, but will have to be repaid over the next five years.
The government could double that to £400 after the war in Ukraine pushed up wholesale prices which could push up bills further later in the year.
The price cap limiting the kWh cost of bills for around 22million households on standard variable tariffs will rise by nearly £700 in April.
The price cap is reviewed twice a year to reflect wholesale energy costs and a further increase in Autumn could push average annual dual fuel bills up to £3,000 a year.
Here's how to get help with bills if you're struggling.
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If you're worried about paying bills, falling behind or are in debt, there are plenty of organisations where you can seek advice for free, including:
- National Debtline – 0808 808 4000
- Step Change – 0800 138 1111
- Citizens Advice – 0808 800 9060
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