State pension, benefits and tax credits increase in April 2013 - this note sets out how the new rates are calculatedJump to full report >>
From April 2013, there will be two main factors used to increase benefits. Benefits received by disabled people and pensioners will increase in line with CPI inflation (+2.2%). Benefits and tax credits for working age people are being increased by 1%. This lower-than-inflation increase (for 2013 and two further years) is in line with the “general economic conditions” and the Government’s aim to “ensure the overall affordability of the welfare system.”
The Government has introduced a ‘triple guarantee’ for uprating the basic state pension, which means that from 2013-14 onwards it will be increased by the highest of the increase in earnings, prices (as measured by the CPI) or 2.5%. For the purposes of the 2013-14 uprating, the 2.5% minimum increase was the highest of these three benchmarks.
The Pension Credit standard minimum guarantee is required to be increased at least in line with earnings; the relevant earnings benchmark rose by 1.6%. However, the Government has decided to raise the standard minimum guarantee by 1.9% instead, so that recipients of Pension Credit get the same cash increase as those on the Basic State Pension, paying for this by reducing payments on the Pension Credit Savings Credit.
The main elements of Working Tax Credit have been frozen in 2013-14, while Child Benefit continues to be frozen at its 2010-11 rates until April 2014
Commons Briefing papers SN06512
Author: Richard Cracknell