Background 

The UK and other countries experienced a sharp increase in the cost of living during 2021 and 2022. The annual rate of Consumer Price Inflation reached 11.1% in October 2022, a 41-year high, before subsequently easing (Office for National Statistics, 2024). During 2023 and into 2024, the cost of living remained high.  

The Cost of Living Payments (CoLPs) were lump-sum payments intended to support immediate pressures faced by the most vulnerable households impacted by the rise in the cost of living. Initially introduced in 2022, they continued until early 2024. This report presents findings from the evaluation of the 2023 to 2024 payments. 

There were 3 separate types of CoLP, each with different eligibility criteria, although many recipients were eligible for, and received, more than one: 

• Means-Tested Benefit Cost of Living Payment (MTBCoLP). This was paid to those receiving means-tested benefits, including Universal Credit. It involved three payments: one of £301 paid during April /May 2023, one of £300 paid during October/November 2023, and one of £299 paid in February 2024.  

• Disability Cost of Living Payment (DCoLP). This was paid to those receiving a disability benefit, such as Personal Independence Payment. It involved a single payment of £150, paid in April 2023.  

• Pensioner Cost of Living Payment (PCoLP). This was paid to pensioner households who received a Winter Fuel Payment (WFP), meaning they were born before 25 September 1957. It was paid as a top-up to the WFP, rather than as a separate payment. This increased the conventional payments of £200 and £300 to £500 for a household with someone of State Pension age and £600 for a household with someone aged 80 or over. 

Methodology 

The aim of this GB-wide research was to evaluate the extent to which the payments helped recipients manage the increased cost of living, and how this varied between groups. To that end, the evaluation has looked at: which expenses became most difficult for recipients to afford; the extent to which recipients were aware of the payments; how they spent their payments; and the impact they felt the payments had on their ability to pay for expenses and their financial and psychological wellbeing.  

A total of 5 surveys were conducted: 

• a survey involving MTBCoLP recipients, running from January to March 2024, asked about the October/November 2023 payment. A follow-up survey with participants who took part in the first survey, running from May to June 2024, asked primarily about the February 2024 payment  

• a survey involving DCoLP recipients, running from January to March 2024, asked about the April 2023 payment 

• a survey involving PCoLP recipients, running from January to March 2024, asked about the top-up to the 2023 Winter Fuel Payment. A follow-up survey with pensioners who took part in the first survey explored whether there were any longer-term impacts of the 2023 top-up 

Alongside these surveys, 90 in-depth qualitative interviews were conducted with recipients between February and April 2024. A further 20 follow-up interviews were conducted in July and August 2024 with MTBCoLP recipients that were more affected by the increased cost of living than others. 

Experiences of the increased cost of living 

Most CoLP recipients had experienced substantial increases in the cost of food and groceries, and energy and utility bills:  

• affordability had declined more sharply for DCoLP and MTBCoLP recipients than for PCoLP recipients. Among MTBCoLP recipients, 80% felt that food and groceries had become harder to afford over the last year, and 74% felt their energy and utility bills had become harder to afford  

• to deal with the increased cost of living, most recipients cut back on their spending, and many borrowed money or got into debt. Over half of MTBCoLP and DCoLP recipients had cut back on either essential spending or heating. 44% of MTBCoLP recipients and 32% of DCoLP recipients had borrowed money. PCoLP recipients were less likely to have cut back on essential spending (47%) or borrowed money (9%) than the other groups. When followed up in May and June, fewer MTBCoLP recipients cut back on essential spending and heating 

• some groups were more affected by the increased cost of living than others. This largely depended on whether claimants had additional essential outgoings that others did not. Three groups were particularly affected: households with children, those with health-related expenses, and those with debt repayments. These groups were more likely to feel that their expenses had increased substantially, and to have borrowed money or accessed charitable support to cope 

Awareness of the payments 

In general, there was good awareness and understanding of the payments:  

• 92% of MTBCoLP and 95% PCoLP recipients remembered receiving their most recent payment. Awareness of payments was lower amongst DCoLP recipients, with 77% remembering receiving their payment. This may be due to the longer gap between the payment and the survey, and the smaller value of the payment 

• almost two-thirds of PCoLP recipients (64%) knew the payment was coming in advance. This may be because they were already used to receiving their WFP each year. However, just 36% of these PCoLP recipients knew that the payment included a cost of living component. In qualitative interviews, PCoLP recipients had expected to receive a payment in the winter to help with energy costs, though they did not distinguish between the WFP and CoLP. In contrast, only 47% of MTBCoLP recipients and 32% of DCoLP recipients knew they were receiving the payment  

How the payments were spent 

The evidence shows that most recipients spent the money on expenses that had become more difficult to afford: energy and utility bills, and food and groceries.  

Of those recipients who said they spent the money on something specific, over 65% across each of the 3 groups said at least some of it was spent on energy and utility bills. 45% of MTBCoLP recipients said at least some of it was spent on food and groceries, as did 34% of DCoLP recipients.  

Many recipients said the money was spent as part of their everyday spending, rather than on something specific. However, in qualitative interviews they tended to explain that the money was most likely spent on energy bills and food, since these were their main expenses. 

Relatively few recipients used the payments to pay off debts (18% of MTBCoLP, 5% of DCoLP, and 2% of PCoLP). This tended to be those who had struggled most with the cost of living over the past 12 months. But those who used the payments to pay off debts generally did not feel that their debt situation had improved substantially as a result. Other uses of the payments included paying for one-off, unanticipated, or additional health-related expenses. 

MTBCoLP recipients’ spending patterns differed slightly between the November 2023 and February 2024 payments. Slightly fewer recipients spent at least some of their February 2024 payment on energy and utility bills, although this remained among the most common uses of the payment. These changes may reflect lower energy needs during May and June compared to January through March, or the impact of the lower energy price cap introduced in April. 

Most payments were spent quickly, within the month they were received. Over half of MTBCoLP recipients (62%) and DCoLP recipients (68%) spent the payments within three weeks, compared to 29% of PCoLP recipients. Generally, those more severely affected by the increased cost of living spent their payments more quickly. This was particularly true for parents. For example, 43% of single parents spent their MTB payment within a week, compared to just 28% of single adults without children.  

Recipients tended to prefer receiving the payments as lump-sums, as opposed to receiving multiple smaller payments. They felt that with smaller payments there was a risk they would make more permanent adjustments to their spending, leading to a greater financial shock when the payments ended. 

The perceived impact of the payments 

The payments had a direct and notable impact on recipients’ perceived ability to meet the cost of living, showing that they were an effective way of helping those most in need to meet their most pressing expenses: 

• recipients felt that the CoLPs helped most with their ability to pay for energy and utility bills. For example, 48% of MTBCoLP recipients felt the payment “helped a lot” with energy and utility bills, while 35% said it “helped a little”, with similar proportions within the other two groups.^{[footnote 1]} 

• without the payments, a substantial proportion of recipients would have needed to take on new debts. Almost two thirds (63%) of MTBCoLP recipients felt that the payment helped them to avoid borrowing, as did 42% of DCoLP recipients. PCoLP recipients were less likely to have taken on new debts in the absence of the payment; only 19% felt the payment helped them avoid borrowing 

The payments also had a range of other benefits, including improved financial resilience and personal wellbeing: 

• across groups, around half of recipients felt the payments helped them to feel more in control over their finances, and over half felt the payments helped them to feel less stressed. Recipients described the payments as giving them “peace of mind” or “taking the pressure off”  

• the payments were made automatically, meaning that recipients did not need to apply for or request assistance. This helped recipients avoid experiences they found embarrassing or shameful, such as asking for a doctor’s note or filling out an application 

• there were positive implications for recipients’ social lives and relationships where the payments helped people to see friends and family, pay back money owed, or “treat” children for the first time in a long time. Most PCoLP recipients felt the payments had helped them to keep warm and that this was important for their mental and physical health 

• recipients described how the impacts tended not to extend beyond the month in which payments were received. For those MTBCoLP recipients who used (at least some of) the payments to pay off debts (18%), this was generally not transformative. Very few (6%) said it had made their debt situation much better or had enabled them to completely pay off debts (7%). In the May-June 2024 follow-up survey, recipients were asked whether they felt their financial situation had improved or worsened since the January-March survey. Most MTBCoLP recipients (52%) felt it was about the same, but 30% felt it had worsened, compared to 18% who felt it had improved 

• the findings show that the payments met their intended aims: they reached a population the vast majority of whom were struggling significantly with the cost of living, and they were spent mostly on energy bills and groceries. But within the population of CoLP recipients, the findings show that the payments were imperfectly targeted, insofar as they were not sensitive to the fact that some recipients had much higher essential outgoings than others  

• those who were struggling most with the cost of living were those with additional expenses, such as paying rent, repaying debts, healthcare-related expenses, and the extra costs that come with raising children. For these recipients, the payments were almost immediately absorbed into everyday spending and were perceived as too small to lead to any substantial change in personal circumstances. Those recipients who had struggled most with the cost of living generally felt the least benefit from the payments