Decisions to raise benefits in line with inflation and to unfreeze local housing allowance have been welcomed, with a cautionary warning that sustained support is needed to help those worst-off in society.

Chancellor Jeremy Hunt heeded campaigners’ long-running calls for housing benefit to increase so it covers the cheapest 30% of properties, and allayed charities’ fears that he might not hike universal credit in line with September’s inflation figure.

Mr Hunt insisted he and other ministers will “continue to support families in difficulty”, describing those in power as a “compassionate Conservative government”.

The changes on both benefits and housing allowance will come into effect from April 2024, but homelessness charity Shelter has called for immediate action so families do not face “an uncertain winter with the threat of homelessness and spending their Christmas in grotty one-room temporary accommodation looming large”.

Acknowledging that cost-of-living pressures “remain at their most acute for the poorest families”, he said the benefits rise would amount to an average increase of £470 for 5.5 million households when it takes effect in April 2024.

Campaigners had voiced concern amid reports in recent weeks that benefits would not be raised in the usual way, instead using last month’s figure of 4.6%, rather than September’s higher inflation figure of 6.7%.

Mr Hunt, addressing Parliament while delivering his autumn statement on Wednesday, also noted that rent often makes up more than half of living costs for private tenants on the lowest incomes.

Recalling demands from campaigners who said unfreezing housing allowance was “an urgent priority”, he said: “I will therefore increase the local housing allowance rate to the 30th percentile of local market rents.

“This will give 1.6 million households an average of £800 of support next year.”

Crisis described the housing benefit increase as “in the short-term, the single biggest step the Chancellor could take to prevent and end homelessness for tens of thousands of households”, while Shelter said it would “provide a huge sigh of relief for the 1.7 million private renters in England relying on housing benefit to help pay their rent”.

Matt Downie, Crisis chief executive, said the three-year freeze had had “devastating and far-reaching consequences” with many simply priced out of renting.

He added: “While the Chancellor’s decision to tackle homelessness in the short-term is a positive step, there is no room for complacency. The next UK government must sustain this investment, otherwise we will see homelessness rise again.”

Shelter chief executive Polly Neate said the rise is “an essential lifeline” and was a “crucial step” for Mr Hunt to take, but urged the Government to “bring this decision forward and unfreeze housing benefit immediately”.

Paul Carberry, chief executive at Action for Children, said: “The increases to benefits will provide some welcome help for families struggling with rising costs and rents.

“It is disappointing, though, that the Chancellor has chosen to spend a huge amount of money on a national insurance tax cut, which largely benefits the better off, rather than targeted help for the low income families he himself says are at the sharp end of the cost of living crisis.”

Big Issue founder and crossbench peer Lord John Bird welcomed the benefits increases, but reiterated a call made by many campaigners in recent times to provide an “essentials guarantee” so people can always afford the basics.

He said what had been announced “still doesn’t go far enough and I urge the Chancellor to look at this closer and encourage the Treasury to engage in more creative thinking”.

Helen Barnard, from the Trussell Trust food bank network, echoed this call – saying that even with the “extremely welcome” measures announced, the costs of the essentials will still not be met for many.

Referring to speculation that benefits might not have risen in line with September’s inflation figure, she said there should never be a debate on the issue, but instead “an essentials guarantee (should be embedded) into the social security system”.

She added: “This would mean that decisions about uprating can be made based on evidence that reflects the realities of people’s lives, rather than having an annual debate shaped by the politics of the day.”