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Inflation rise to push up cost of state benefits

By Jamie Grierson

Published 18/10/2011

Inflation is expected to hit a three-year high today, landing the government with a bumper bill for increased state benefits and underlining the squeeze on household incomes.

September's consumer prices index (CPI) will be used to determine next April's rise in the basic state pension, piling pressure on the public purse but bringing relief for hard-pressed pensioners.

Based on City forecasts for CPI of 4.9%, the basic single state pension will increase by £5 to £107.15 a week, while the joint state pension will increase by £8 to £171.35.

Employment benefits, such as Jobseeker's Allowance (JSA) and income support are also calculated using the September CPI rate, meaning the JSA could increase by £3.31 to £70.81 a week. This will put more pressure on Chancellor George Osborne, who is battling to slash the nation's budget deficit, as unemployment has hit a 17-year high of 2.57m.

Some economists believe that inflation could spike at 5.1%, up from 4.5% in August.

The figures are unlikely to overly concern the Bank of England, which has already forecast inflation to rise to 5% this year.

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