Eighth Report - Autumn Statement 2022 – Cost of living payments

The Government provision of additional support to those on low incomes through one-off payments presents a problem of cliff-edges to that support. If someone doesn’t match the criteria required of the means-tested benefits, both in terms of income and the time they are being assessed for eligibility, they will not receive this significant lump sum support when a very similar household may do so. That appears unfair. It may also create a disincentive to work, as it may be in someone’s interests to reduce their hours at key periods to ensure their eligibility for the benefit at the required time.

We recommend that the Government consider a greater number of lump-sum payments than the two in 2022–23, which would better ensure that more households have support at the time of their greatest need, and would reduce the severity of the disincentives to work within each relevant assessment period. We recommend mirroring the payments model used in the Energy Bill Support Scheme—a payment each month for six months—which provided regular help over the colder winter period.

We would also welcome analysis from the Treasury of: • the work disincentive effects of different sizes and frequencies of lump sum payments, and • whether a taper might better incentivise work as part of any subsequent payments from 2024–25.

Cliff-edges remain present elsewhere. Certain income levels also attract unusually high marginal tax rates or the loss of means-tested entitlements. Such features are distortionary. The Treasury should endeavour to smooth them wherever possible, in areas of its own responsibility, and when considering funding requests from departments. We will return to this issue in future. (Paragraph 25) Autumn Statement 2022 – Cost of living payments 13