MEZIESBLOG

Rises in benefits and pensions are hooked to September’s inflation data.

Millions of benefit claimants will, by law, see an increase next April of whatever headline CPI figure is announced at 7am.

September’s figure is also used as part of the triple lock, which guarantees the state pension rises each April by whatever is highest from: average wage growth, inflation or 2.5%. Next year, wages are likely to be the highest of these as they grew by 4.8% between May and July.

Benefits

These benefits and tax credits are linked to inflation by law:

• Personal independence payment (PIP)
• Disability living allowance
• Attendance allowance
• Incapacity benefit
• Severe disablement allowance
• Industrial injuries benefit
• Carer’s allowance
• Additional state pension
• Guardian’s allowance

For the rise earlier this year, the government also pledged the same increase for benefits including:

• Universal credit
• Child benefit
• Contributory employment and support allowance
• Contributory jobseeker’s allowance
• Statutory maternity/paternity pay and maternity allowance
• Income-based jobseeker’s allowance (JSA)
• Income-related employment and support allowance (ESA)
• Income support
• Working tax credit
• Child tax credit

Under the bonnet of inflation data

Lower-than-expected inflation data is good news for those hoping for interest rate cuts.

Rates are kept high to stem spending and, in turn, slow price rises.

Two figures beyond the headline rate of 3.8% also came in below economist expectations.

Core inflation, which strips out volatile elements such as fuel and energy, dropped from 3.6% in August to 3.5% in September.

Services inflation, which is largely made up of wages, remained unchanged at 4.7% – below the 4.9% forecast by analysts.

Inflation sticks at 3.8%

Inflation remained the same in September at 3.8%, the latest Office for National Statistics figures show. 

While the figure is still relatively high, it’s lower than expected. 

Economists had widely predicted that it would reach a peak of 4% in September before starting to fall. 

September’s figure is particularly important because it helps inform how much benefits go up next year.

“A variety of price movements meant inflation was unchanged overall in September,” said ONS chief economist Grant Fitzner. 

“The largest upward drivers came from petrol prices and airfares, where the fall in prices eased in comparison to last year. 

“These were offset by lower prices for a range of recreational and cultural purchases including live events. The cost of food and non-alcoholic drinks also fell for the first time since May last year.”