Benefits squeeze means payouts will rise below rate of inflation

Ben Southwood
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WORKING age benefits will rise just one per cent over the next three years, well below the projected levels of inflation calculated by the government's budget watchdog.

The real-terms cut suggests that chancellor George Osborne brushed off strong opposition to the move from Liberal Democrats Nick Clegg and David Laws and work and pensions secretary Ian Duncan Smith. Their opposition to cutbacks in this area saw last year’s working age benefits climb 5.2 per cent as inflation soared – though median wages grew just 1.9 per cent between December 2010 and the same month in 2011.

One per cent growth over each of the next years could see the real value of working age benefits fall a cumulative 3.6 per cent, as the Office for Budget Responsibility expects consumer price inflation of 2.5 per cent during 2013, 2.2 per cent during 2014 and two per cent during 2015. Without Osborne’s move, benefits would have increased 2.2 per cent next year, with September’s annual consumer price inflation rate – but implementing the move is forecast to save £3.7bn by 2016.