Distributive policy

An increase in benefits should be the Chancellor’s ‘top political priority’

A higher benefit increase will provide four times more support to low-to-middle income households than reversing the National Insurance increase, according to new analysis.

Raising benefits by an additional five percentage points to keep pace with inflation would provide “four times more support to the bottom half of the income distribution per pound spent, than removing the increase in insurance contributions.” National Insurance (NIC),” research from the Resolution Foundation suggests.

The analysis, titled Softening The Blow, outlines a trio of support options that could be taken by Chancellor Rishi Sunak in his spring statement on Wednesday, as the think tank warned that households could see “incomes plummet of 4%” (or £1,000) this financial year (2022-23).

The three options include: increasing all working-age benefits and pensioners by an additional five percentage points in 2022-23, or 8.1% instead of 3.1% as planned; raise the national insurance threshold or reverse the 1.25 percentage point increase in NICs in April.



Low to middle income households will be hardest hit by the cost of living squeeze, particularly when the energy price cap rises and should therefore be the focus of support

Adam Corlett, Resolution Foundation

Reversing the NIC hike would “take half of the gains to the wealthiest fifth of households,” according to the research, while raising the benefit increase and the NIC threshold “would provide much needed respite.” needed by families in the coming year”.

Resolution Foundation senior economist Adam Corlett warned that “rapidly rising inflation is poised to cause the greatest strain on family incomes across the UK since the 1970s”.

He added: “While cuts in fuel taxes to relieve pressure at the petrol pump will inevitably be part of the package announced this week, the main income support will have to come either from the tax system or the benefit system.

“Low to middle income households will be hardest hit by the cost of living squeeze, particularly when the energy price cap rises and should therefore be the priority for support.

“Raising benefits by a further five percentage points would benefit these families four times more than reversing the National Insurance hike, and should be the Chancellor’s top policy priority.

“But if Rishi Sunak is keen to demonstrate his tax-cutting credentials alongside increasing benefits, then raising the national insurance threshold would also be the best route, as it is well targeted at middle-income households. .”