The benefits freeze is to end in April, the Government has confirmed, in a move criticised by Labour as a “cynically-timed announcement”.
Universal Credit and other welfare payments will rise 1.7% in line with inflation and the state pension will increase by 3.9%, the Department for Work and Pensions said on Sunday.
Labour said “nobody will be fooled” by the announcement that comes in the run-up to the December 12 election, while campaigners said the rise would not reverse the damage already done.
The DwP said the end to the freeze introduced by Tory former chancellor George Osborne would cost £5 billion per year.
Shadow work and pensions secretary Margaret Greenwood said: “Nobody will be fooled by this cynically timed announcement which even now will leave the benefits freeze in place until next April.
“Harsh, punitive Conservative policies like the benefits freeze, the two-child limit and the five-week wait have created a society where people are being forced to turn to food banks in ever increasing numbers just to survive.
“Labour will abolish the benefits freeze, scrap Universal Credit and put an end to the two-child limit. We will ensure that our social security system genuinely protects people from poverty as it should.”
Labour leader Jeremy Corbyn criticised the Tories for having “imposed” the freeze in the first place and pledged that Labour would introduce “a much more humane, humanitarian system”.
Homelessness charity Shelter called on ministers to go further to increase housing benefit.
Chief executive Polly Neate said: “While the Government may have finally called time on its benefits freeze, the proposed rise in support is so tiny it won’t make a dent in the damage already done.
“The truth is housing benefit is now so out of step with the cost of private renting – it will take a lot more to free families on lower incomes from the shackles of poverty and homelessness that many have become trapped by.”
About 2.5 million people on Universal Credit and millions more on legacy benefits will benefit, the Government said, ending the freeze that has been in place since April 2015.
The state pension will increase to £175.20 per week, meaning recipients will get an extra £344 a year.
Work and Pensions Secretary Therese Coffey said: “We’re clear the best way for people to improve their lives is through work but we know some people require additional support.
“Our balanced fiscal approach has built a strong economy, with 3.6 million more people in work since 2010. And it’s that strong economy which allows us to bolster the welfare safety net by increasing benefit payments for working-age claimants now.”
But the Resolution Foundation think-tank said the announcement was a missed opportunity.
Senior economic analyst Adam Corlett said: “The benefit freeze was always due to end next year.
“The Government’s confirmation that working-age benefits will only keep pace with rising prices means there will be no increase in living standards, and those in need of extra support will continue to be left behind.
“With child poverty at risk of hitting record highs, this is a missed opportunity to provide a much-needed boost for low to middle-income families.”