Budget delivers raft of measures to support low-income households, but leaves LHA frozen

Benefits and pensions

 

Ms Reeves used her Budget to announce changes to the proportion of Universal Credit that can be deducted towards paying off a claimant’s debt, in an effort to lessen the burden on struggling households. Under the plans, a new ’Fair Repayment Rate’ caps debt repayments at 15 per cent of the standard allowance, down from 25 per cent.

 

Treasury said this will mean 1.2 million households will be better off by £420 per year on average as a result of the change and around 700,000 of the poorest families with children would benefit.

 

This measure increases the public sector net cash requirement by £385m in 2029-30, Treasury added.

 

“The government recognises that additional support continues to be needed to improve economic security and resilience for those families who need it most,” Treasury said.

 

The Carer’s Allowance weekly earnings limit will also be raised to improve financial security for unpaid carers to support them into work or to work more hours if they choose.  From April 2025, the weekly limit will increase from £151 a week to the equivalent of 16 hours at the National Living Wage (NLW), Budget documents confirmed.  

 

The government will also uprate all working age benefits for 2025-26 in full, by the September 2024 Consumer Price Index rate of 1.7 per cent. This will provide 5.7 million families on Universal Credit with an average annual increase of £150 in 2025-26, according to the Budget document.

 

The government said it will maintain the state pension triple lock for the duration of this parliament.

 

The basic and new state pension will increase by 4.1 per cent from April 2025, in line with earnings growth. The government said this means over 12 million pensioners will gain up to £470 each in 2025-26.

 

The Pension Credit Standard Minimum Guarantee will also increase by 4.1 per cent from April 2025. This means an annual increase of £465 in 2025-26 in the single pensioner guarantee and £710 in the couple guarantee.

 

The government previously announced in July that it would end the universal award of winter fuel payments to pensioners, instead targeting the payments at those in receipt of Pension Credits and certain other income-related benefits. The Budget noted that there had been a “a significant increase” in Pension Credit claims following the announcements.

 

In addition, from 2026, the administration of Pension Credit and housing benefit will be brought together for new claimants, which is two years earlier than previously planned. Budget documents said that this would support more people to access the benefits they are entitled to.

 

National Living Wage

 

Ms Reeves referred to the government’s move to update the remit of the Low Pay Commission (LPC) in July to ask them to recommend a NLW that, for the first time, takes into account the cost of living.

 

She confirmed that the government has now accepted the recommendations in full and the NLW will increase by 6.7 per cent to £12.21 per hour from April 2025.

 

According to the Budget document, this represents an increase of £1,400 to the annual earnings of a full-time worker on the NLW and is expected to benefit over three million low-paid workers across the UK.

 

“Fixing the foundations will create the necessary conditions for growth, as well as providing the economic stability working people need,” Treasury said.

 

“The choices made in the Budget also mean that the government will provide support to the people who need it the most, delivering on its commitments to protect working people, spend taxpayers’ money more sustainably, and provide a welfare system that supports people to work, where they can.

 

“Rewarding work with a fair wage is the best way to improve living standards, while also providing people with the security of knowing they will be able to pay their bills now and in the future.”

 

Over time, the government intends to create a single adult wage rate, and therefore also asked the LPC to recommend a minimum wage for 18-20 year olds that would begin to close the gap with the main NLW rate.

 

In accepting the recommendation from the LPC, from April 2025, the National Minimum Wage (NMW) for 18 to 20 year olds will be £10.00 per hour, an increase of 16.3 per cent.

 

According to Treasury’s Budget document, this was the largest-ever increase in both cash and percentage terms.

 

This means a boost to annual earnings of over £2,500 for nearly 200,000 young people across the UK, Treasury said.

 

The chancellor also confirmed that there would be no increases in income tax and National Insurance tax for workers.

 

However, other taxation measures in Ms Reeves’ Budget (including changes to National Insurance contributions by employers, and increased tax on the “carried interest” paid to private equity fund managers on successful deals) will contribute to around £40bn of tax rises overall. The income boost for the government is intended to  “fix the foundations” of the economy and support investment into public services, Ms Reeves said.

 

Commenting on the Budget, Paul Kissack, chief executive of the Joseph Rowntree Foundation, said: “Today’s actions alone won’t be enough to fix the foundations for millions who struggle winter after winter in devastating hardship. The chancellor is right that change must be felt. The people who needed to feel the most change are those living in and at risk of hardship. 

 

“Limiting the devastating impact of deductions is a good step. There was also welcome investment in social homes, help for carers to work and care, and a rise in the minimum wage.

 

“It’s deeply worrying that we haven’t seen changes to social security that will seriously bring down hardship. In particular, private renters will feel let down by the choice to keep Local Housing Allowance frozen, meaning it will become further out of step with local rent levels, which have soared in recent years.”

 

Hear key takeaways from the Budget from expert economists Paul Johnson, director of the Institute for Fiscal Studies, and Yael Selfin, vice-chair and chief economist at KPMG, at the Social Housing Annual Conference on 30 November in London, in a programme chaired by Newsnight’s political editor Nick Watt.

 

Other expert speakers at the event include Florence Eshalomi MP, chair of the Housing, Communities and Local Government Committee; Bernadette Conroy, chair of the Regulator of Social Housing; and Shahi Islam, director of affordable housing at Homes England.

 

For more information, and to book while spaces remain, click here.