The freeze in benefit payments is to come to an end next year, the government has confirmed.
Working-age benefits such as universal credit and jobseeker’s allowance will rise by 1.7% from April 2020, the Department for Work and Pensions said.
It ends former Tory chancellor George Osborne’s decision to introduce a freeze from April 2016.
Labour called it a “cynically-timed” announcement ahead of the general election on 12 December.
The move will be seen by some as an election pitch to poorer Leave-backing areas.
Our correspondent added it follows a raft of other spending commitments made by Boris Johnson since he became prime minister, including funding for the NHS, schools and police.
The benefits freeze – announced in the 2015 Budget – was intended to last until the end of the current financial year but until now there had been no confirmation it would be ending.
Rather than increasing each year in line with inflation – to reflect the rising cost of living – most working-age benefits and tax credits have been kept at the same value for more than four years, having last risen in April 2015.
Groups such as the Joseph Rowntree Foundation have argued that this has been among the biggest factors in exacerbating poverty levels among working families with children.
Other benefits that have been frozen but are now set to rise by inflation are: Employment and support allowance, income support, housing benefit, child tax credits, working tax credits and child benefit.
Some of these are legacy benefits, which are being replaced by universal credit.
The government also said the state pension – which has not been frozen due to the so-called triple lock – will increase by 3.9%.
Disability benefits and carer’s allowance, which have not been subject to the freeze, will also increase by 1.7% next year.
The increase in benefits is expected to cost £5bn and ministers say the decision to end the freeze will help 10 million people.
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.”
Labour, which is promising to scrap universal credit in a revamp of the benefits system, pointed out the freeze would remain in place for a number of months yet.
Adam Corlett, senior economic analyst at the Resolution Foundation, a think tank focusing on people on lower incomes, described the announcement as a “missed opportunity” that would not increase living standards.
“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,” he said.
“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.”
Two-child benefit limit
The announcement comes as a committee of MPs warned the government’s policy of limiting welfare benefits to two children must be scrapped because it forces families to stretch “frozen and capped” incomes to “breaking point”.
The Work and Pensions Select Committee said the government had not offered evidence to counter forecasts that the policy will “significantly increase” child poverty.
The two-child limit means that in families where there are already two or more children, the child element in universal credit and tax credits – worth £2,780 per child per year – is restricted to the first two children. It applies to children born after 6 April 2017.
Grace period for car park fines
Meanwhile, the government has proposed that private car park operators be made to give drivers up to a 10-minute grace period after their tickets expire before issuing fines.
Local Government Secretary Robert Jenrick said he wants a compulsory code of practice for the industry to “restore common sense” to the issuing of parking fines and “crackdown on dodgy operators” in England, Scotland and Wales.