Universal Credit is set to rise next year as the government has announced it is ending the benefits freeze in 2020.
The move has been criticised by Labour who have blasted it as a "cynically-timed announcement" in the run up to the general election.
The Department for Work and Pensions (DWP) has revealed that Universal Credit and other benefits payments will rise 1.7 per cent in line with inflation in April and the state pension will increase by 3.9 per cent.
The end to the freeze, which was introduced in April 2015 by Tory former chancellor George Osborne, will cost £5 billion per year according to the DWP.
The government say that around 2.5 million people on Universal Credit will benefit and the state pension will increase to £175.20 per week - an extra £344 a year.
But campaigners have criticised the announcement claiming that the rise will do little to reverse the damage already done by the benefits freeze.
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.
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"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."
Labour leader Jeremy Corbyn also criticised the Tories for having "imposed" the freeze in the first place and pledged that Labour would introduce "a much more humane, humanitarian system".
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."
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."
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Mr Corbyn said announcements from the government that it would be ending the benefits freeze and banning fracking, which both came this weekend, showed the "power" of Labour's policies.
"I think it shows the power of the message that Labour's been putting out for several years now," he said. "About the need for social justice in this country, about the need for environmental sustainability, and about the need to invest in good quality jobs for the future, which is what our green industrial revolution will do in all parts of Britain."