National statistics

Abstract of DWP benefit rate statistics 2019

Published 18 February 2020

The latest release of these statistics can be found in the Abstract of DWP benefit rate statistics collection.

Summary

The Abstract of DWP benefit rates statistics is an annual publication produced by the Department for Work and Pensions (DWP). The purpose of the publication and data tables is to provide a reference source for people who are interested in:

• benefit uprating
• The value of benefits compared to prices and earnings

The aim is to provide answers a variety of questions, such as:

• How does the value of state benefits compare to prices?
• Are state benefits worth more or less today compared to previous years, in terms of Average Earnings?
• How does the income of an unemployed person compare with Average Earnings?
• How do the rates of benefits compare with one another?

1. Benefit uprating

This section explains policy changes and highlights the factors involved in benefits uprating from 1974 until 2019. Benefits have been uprated by a variety of methods during this period, including:

• forecasts
• indices of prices and earnings
• one-off payments
• targeting of particular components of a benefit
• revisions to the eligibility rules governing the benefit

Price Inflation and Earnings growth indices in benefit uprating since 1974

Over time, there have been various changes to the components of the indices that have been used to uprate benefits. The major changes have been:

In 1974, long-term benefits such as pensions and long-term sick and disabled benefits were linked to the higher of one of two annual increases, as measured by the Retail Prices Index (RPI) and the Average Earnings Index.

In 1976 a forecast was used to estimate the movements in price inflation and earnings growth.

Long-term benefits were linked to the prices index only in 1979.

A historical basis was used to calculate the price increases in 1983. ROSSI was introduced in 1983, calculated as RPI (all items) less housing costs, to uprate income-related benefits.

In 1992 the definition of ROSSI changed to New ROSSI; this is calculated as RPI (all items) less rent, local taxes and mortgage interest payments.

Since 1983, benefits have been uprated in relation to the RPI, ROSSI or New ROSSI. The actual increase in particular benefits depends on the index applied and on policy decisions as to the appropriate rate for the benefit.

In 2010 the chancellor announced that from April 2011 most DWP administered benefits would be uprated in line with the Consumer Prices Index (CPI). Also, the government reiterated previous commitments to restore the link between earnings and the uprating of the Basic State Pension. The government has since applied a ‘triple lock’ guarantee; that the Basic State Pension will increase by the highest of the growth in average earnings, price inflation or 2.5%.

Figure 1: Uprating of State Pension under the “Triple lock” guarantee since April 2011

Year	Uprating percentage	Basis for uprating
April 2011	4.6%	Price Inflation (RPI)
April 2012	5.2%	Price Inflation (CPI)
April 2013	2.5%	2.5% Minimum
April 2014	2.7%	Price Inflation (CPI)
April 2015	2.5%	2.5% Minimum
April 2016	2.9%	Earnings Growth
April 2017	2.5%	2.5% Minimum
April 2018	3.0%	Price Inflation (CPI)
April 2019	2.6%	Earnings Growth

Source: Abstract of DWP benefit rate statistics.

The new State Pension (nSP) was introduced on 6 April 2016 for people reaching State Pension Age (SPA) from that date. People who had already reached SPA continued to be entitled to the Basic State Pension and Additional State Pension, where applicable. There are transitional arrangements in place to ensure that the amount of state pension an eligible individual receives is not less than under the previous system, based on their National Insurance record to 5 April 2016. The nSP (excluding Protected Payments) is required by statute to rise in line with average growth in earnings. The nSP is also currently subject to the “triple lock” commitment.

For people who reached SPA before 6 April 2016, Pension Credit has 2 elements:

• the Guarantee Credit, which provides a minimum level of income
• the Savings Credit, which aims to provide an additional amount for people aged 65 and over who have made some provision for their retirement

The Savings Credit element was removed for people reaching SPA from 6 April 2016 when nSP was introduced.

Legislation requires the Standard Minimum Guarantee (SMG) in Guarantee Credit to be uprated at least in line with earnings. Between 2016 and 2019, the SMG has risen at least in line with earnings.

Since April 2011, benefits to meet the additional costs of disability were increased in line with CPI inflation, as were most discretionary benefits and tax credits for working age people.

Between 2013 and 2015, most discretionary benefits and tax credits for working age people were increased by 1% each year.

Under the Welfare Reform and Work Act 2016, between 2016 and 2019, most discretionary benefits and tax credits for working age people were frozen at the April 2015 rates.

See Annex E in the methodology statement for a list of the benefits and Tax Credits that will be frozen.

See the data tables (table 4.0) for historical values of inflation and earning measures used for uprating.

2. The value of benefits compared to price inflation and earnings growth

Rates of the principal benefits for each uprating can be found in the accompanying Excel data tables in the collection of abstract of DWP benefit rate statistics.

The accompanying data tables show:

• the rate of the benefit at each uprating date
• the percentage increase since the previous uprating
• the percentage increase in prices between uprating periods
• the value of the benefit at April 2019 prices at the date of uprating
• its average value at April 2019 prices over the period between upratings
• its value as a percentage of average earnings at the date of uprating

For reasons of comparison and maintaining time series before CPI was created, both the CPI and RPI are used to convert the values of each benefit to April 2019 prices in the enclosed tables.

How do the values of state benefits compare to price inflation?

The data tables published alongside this publication take the key state benefits at each benefit uprating date and show the rate of benefit in payment for key claimant types. As prices generally rise each year, it is difficult to look at these benefit rates and sensibly compare them over time. Hence, the tables use various different measures of price inflation to convert all benefit rates to April 2019 prices. The benefit rates then become comparable across time in terms of the purchasing power of the benefit payment. Two price indices are used, the:

• Retail Prices Index (RPI)
• Consumer Prices Index (CPI)

Read an explanation on the key differences between RPI and CPI.

Relevant to this is a recent analysis published by the ONS on the shortcomings of the RPI.

The ROSSI Index is defined as the RPI with all items except housing costs. It was used by DWP for the uprating of income-related benefits between November 1983 and 1991. Housing costs were defined as mortgage interest, dwelling insurance and ground rent, local taxes, water charges, repairs and maintenance and DIY materials for repairs and decorations. The items excluded accounted for 7% of the items in the RPI. Since the uprating of April 1992 until April 2010, a revised version of the ROSSI index (New ROSSI) was used to uprate income-related benefits. The index is composed of the RPI (all items), excluding rents, local taxes and mortgage interest payments. The New ROSSI series has been discontinued as of January 2017. For further information, see the clarification of publication arrangements for the Retail Prices Index and related indices from ONS.

Many benefits have been historically uprated in line with these indices since 1974. Hence, the real value of benefit payments (at April 2019 prices, relative to RPI) has remained fairly stable since then. Benefits such as State Pension and Pension Credit have seen some moderate growth in real value since 1974, due to uprating policies linked to earnings in some years and policies to protect the income of those over State Pension age.

The level of price inflation measured by CPI is usually lower than RPI. Until 2011, most DWP benefits were uprated by RPI or ROSSI, meaning their real values relative to CPI increased in this period. Since April 2011, CPI has been Government’s preferred measure of prices and has been used to uprate benefits. As noted above, the Welfare Reform and Work Act 2016 has frozen the rate of some benefits at 2015 to 2016 levels.

The benefits that were impacted by the Freeze include:

• Jobseeker’s Allowance
• Employment and Support Allowance
• Income Support
• Housing Benefit for those below State Pension age
• Universal Credit

Carers and Disability elements within the benefits listed above were not included as part of the Freeze.

The Freeze also applied to Working Tax Credit, Child Tax Credit and Child Benefit, which are the responsibility of HM Revenue and Customs (HMRC) and HM Treasury.

Are state benefits today worth more or less in terms of Average Earnings than in previous years?

Another way to analyse the value of state benefits across time is to compare the value of benefits to the average full-time wage. Average earnings are estimated each year using the Annual Survey of Hours and Earnings. This survey began in 2004, but average earnings statistics have been collected in a broadly comparable form since 1970.

The New Earnings Survey (Great Britain) (NES), which was conducted by the Office for National Statistics (ONS) each April between 1970 and 2004, gave a detailed picture of the pattern of earnings across the whole economy. Between 1970 and March 1983, the survey included full-time workers, aged 21 and over, whose earnings were unaffected by absence. From April 1983, the survey included full-time workers on adult rates, whose earnings were unaffected by absence. Employers were asked to provide information about the earnings of a 1% random sample of employees.

This survey was replaced in October 2004 by the Annual Survey of Hours and Earnings (ASHE). ASHE improved on the NES by extending the coverage of the survey sample, introducing weighting and publishing estimates of quality for all survey outputs.

The accompanying data tables show the rate of benefit as a percentage of average earnings in the same year.

As earnings have historically risen faster than prices, most benefits show a fall in value when compared to average earnings. However, in the most recent years, the economic downturn has led to lower wage inflation. This means that the value of benefits has risen slightly against average earnings.

State Pension and Pension Credit have often been uprated differently; sometimes using earnings as part of the uprating method. These benefits show a relatively flat profile when compared to average earnings. Since April 2011, for Basic State Pension and April 2017 for New State Pension the “triple lock” guarantee has ensured that payments increase by the highest of the growth in average earnings, price increases or 2.5%.

It is important to note that the reference index for uprating by average weekly earnings (AWE) is not the same as the data source for the earnings comparison (ASHE). Therefore, even if earnings were the highest in the triple lock and were used to uprate, it would not necessarily show the same growth as ASHE.

Between 1997 and 2019, overall the value of Pension Credit has risen against earnings.

How do the rates of benefits compare with one another?

The data tables show the rates of the key state benefits at each uprating and the real values (in April 2019 prices, using RPI or CPI). These real values are given at the point of uprating. This represents the real value of that benefit (in April 2019 prices) at the date of first payment.

To give a better representation of the real value of the benefit across the whole period that rate was in force, the tables also show the real value of the benefit between uprating periods. This calculation uses the average value of the benefit (in April 2018 prices) in each of the months the rate was used.

3. About this release

• after a user consultation exercise on the future of this publication between March and June 2019 we decided that it will continue to update and publish the abstract in line with user needs. We published a response to the comments raised by users during the consultation on 19 December 2019

• this publication was previously called the called the ‘Abstract of statistics’. However, to better describe the publication and help improve web searches, we changed the publication title to ‘Abstract of DWP benefit rate statistics’

• We have also moved the summary document into this accessible HTML format which should help make the release easier to navigate

The tables accompanying this release can be found in the collection of abstract of DWP benefit rate statistics. Please note that the data tables do not include supporting commentary; users should refer to this release and the policies and statements documents for background information.

This publication was assessed by United Kingdom Statistics Authority in June 2012 and designated as a National Statistic in June 2013, in accordance with the Statistics and Registration Service Act 2007 and signifying compliance with the Code of Practice for Official Statistics.

Designation can be broadly interpreted to mean that the statistics:

• are well explained and readily accessible
• are produced according to sound methods
• are managed impartially and objectively in the public interest

Once statistics have been designated as National Statistics, it is a statutory requirement that the Code of Practice shall continue to be observed.

4. Known issues, changes and revisions to the Abstract

As of January 2017, the publication of New ROSSI figures has been discontinued. Therefore, we have taken comparative data using New ROSSI out of this publication.

Due to improvements in the methodology in the 2017 edition, previous editions are no longer directly comparable with the editions from 2017 onwards, and are therefore outdated. We removed the previous publications from the Abstract of statistics collection page. They are, however, available on request should they be required.

To reflect changes in benefit provision, we have introduced tables covering the new State Pension and further breakdowns of Universal Credit.

5. Where to find out more

This document, supporting tables and background information can be found on the collection page.

Quality and methodology statements for the Abstract of DWP benefit rate statistics can be found under our policies and statements section.

For more information on the differences between CPI and RPI read the following information notes on the ONS website.

Read an analysis by the ONS on the shortcomings of RPI.

Details of other National and Official Statistics produced by the Department for Work and Pensions can be found on the Statistics at DWP page.

6. Contact information and feedback

Lead Statistician: Alan Gibson, alan.gibson@dwp.gov.uk

We would very much welcome feedback on this release and on the summary’s new format as an HTML based document. Email DWP at stats-consultation@dwp.gov.uk

Feedback can also be provided through the abstract of statistics questionnaire.

ISBN: 978-1-78659-186-9