Anti-poverty charities have said it would be “indefensible” for the chancellor, Jeremy Hunt, to use the sharp drop in inflation last month to justify increasing working-age benefits by a smaller amount in order to save up to £2bn from the welfare bill.
It is understood that the Treasury is considering using October’s consumer price index figure of 4.6% for the annual uprating in the benefits, instead of the usual September reading, which was 6.7%.
Campaigners said struggling households would be hit hard by a “big cut” to their finances if Hunt switched to the much lower October CPI rate as the benchmark for raising working-age benefits in April 2024.
State pension and benefit payments rose by the same level this April. Bloomberg reported on Tuesday that ministers were looking into whether to split next year’s uprating, with a lower rise in working-age benefit of 4.6%, but a 6.7% increase in the state pension.
The saving from the benefits bill for the financial year 2024-25 is estimated to be £2bn.
The Treasury minister Gareth Davies refused on Wednesday to guarantee that the September figure would be used. He told ITV’s Good Morning Britain programme: “I am not going to speculate what may or may not be in the autumn statement. But I would point out that we did uprate benefits by quite some considerable margin earlier this year.”
The charities Action for Children and the Joseph Rowntree Foundation said lower-income households that had struggled through the pandemic and the cost of living crisis would find the reduction hard to manage.
Peter Matejic, the foundation’s chief analyst, said: “[Many families] live in a world where their income, in many cases, simply doesn’t cover costs, while the government talks about cutting their support further.”
He added: “It’s indefensible that the government is reportedly considering cutting the benefits of struggling families worried for their future, with news stories suggesting it plans to use today’s figures instead of last month’s to fiddle the figures and hide a big cut.
“In the autumn statement, benefits must be increased in line with inflation and local housing allowance must be unfrozen to support private renters with their housing costs. The chancellor should also take steps to ensure that universal credit, at a minimum, always enables people to afford the essentials.”
Reports of families struggling with rising bills, including having to switch off electrical appliances such as fridges, have increased in recent months as the cumulative effects of price increases for essential items such as food and energy have taken a toll.
While inflation fell from 6.7% in September to 46% in October, the Office for National Statistics said food prices were up about 30% since 2021.
Action for Children’s chief executive, Paul Carberry, said the cost of living crisis was getting worse for many of the families that the charity helped every day, even though the rate of inflation had slowed.
Carberry said: “The chancellor must use the autumn statement to protect families with children from these intense and ongoing pressures on household finances. At the very least, he must raise benefits by inflation in the usual way using the September figure and reform cost of living payments to account for family size.”
