Anti-poverty campaigners expressed relief at the chancellor’s decision to increase benefits by 10.1% next year but warned that millions of the poorest people would still face a fall in spending power as inflation soars.The increase is lower than the current 11.1% rate of inflation and follows years of cuts to the real value of benefits affecting the lives of 9 million households – 7 million of which include someone who works.The rise will cost £11bn and was greater than the 5.4% rate of increase that had been feared. In what he described as “targeted support to help our most vulnerable citizens”, Jeremy Hunt said a family on universal credit would benefit next year by about £600 on average. But analysts said millions still faced a hugely challenging winter as increased payments would not arrive for another five months.Hunt also announced that after an increase of 630,000 in the number of economically inactive working-age adults since the start of the pandemic, 600,000 more people on universal credit would be asked to meet a work coach to increase their hours or earnings.Rebecca McDonald, the chief economist at the Joseph Rowntree Foundation, said: “In taking this stand, the government has acknowledged that people cannot withstand benefits being eroded any further. However, families are facing the worst winter many will remember and can’t wait for April – they need the help now to get through a winter of soaring costs. “Even with uprating, rates are at historic lows and households facing difficult times are increasingly not able to cover the essentials. This winter and beyond is still going to be a frightening obstacle course just to afford the essentials.”Alison Garnham, the chief executive of Child Poverty Action Group, said it was a relief that benefits and the benefit cap would rise with inflation, but added: “This is only the fourth time benefits have risen by inflation in the last 10 years and as a result of austerity – that today the chancellor praised – there are almost 4 million kids living in poverty in the UK. Today’s package will not stop the ice from cracking under struggling families.”Action for Children’s director of policy, Imran Hussain, said: “Families we support will be greatly relieved,” but he said benefit levels were “still well out of step with what families need to live on”.Hunt announced additional cost of living payments next year of £900 for households on means-tested benefits but only £150 for people on disability benefits, which Disability Rights UK said was below inflation and like “being thrown peanuts”.The charity’s chief executive, Kamran Mallick, said: “While the government hasn’t completely put the knife into disabled people, it is still twirling it between its fingers.”Hunt also announced a cap on social rent increases – affecting 4 million households – of a below-inflation 7% in 2023-24. The cap will not cover people in shared ownership properties, but housing associations representing 80% of shared ownership homes are committing to match it, the National Housing Federation said.The national living wage will rise in April by 9.7% to £10.42 – an annual pay rise worth more than £1,600 to a full-time worker, but still below current inflation.As predicted, the chancellor raised state pensions in line with inflation, with a £870 increase from April – the biggest ever in absolute terms. He also increased the pension credit by 10.1%, worth up to £1,470 for a couple or £960 for a single pensioner.