The Economic and Social Research Institute (ESRI) has said Budget 2022 will on average compensate most households for price growth forecast for next year.
In its post-Budget analysis to be presented today, the ESRI said above inflation increases to core social welfare payments as well as supplemental payments for dependents and those living alone are large enough to offset the impact of carbon taxes on the lowest income 20% of households.
The ESRI found these changes will also leave poverty levels slightly lower than if all welfare payments and tax bands had been changed in line with inflation.
However, it noted the after-tax purchasing power of lower earners who do not earn enough to pay income tax will be reduced, although they will benefit from the increase in the minimum wage.
It also noted that below inflation increases in the Working Families Payment and State Pension will mean that some low-income working parents and retired couples who do not receive the Fuel Allowance may be worse off if their incomes are eroded by rising fuel prices.
Karina Doorley, Senior Research Officer at the ESRI, said " ... some low-income working parents and retired couples will see real cuts to their payments, as may others if price rises turn out to be larger than forecast".