Why the inflation fall may be bad news for benefit recipients

The 1.7% inflation figure will be a political headache for the Treasury and the government, because it means benefit payments will rise next spring by less - possibly significantly less - than cost-of-living rises for those on low incomes, which are largely about energy and food.

Today’s fall in inflation to well below the 2% target is due to airfares and motor fuels, which are of less relevance to those on low incomes.

The likely chance of benefits rising by less will re-ignite concerns about children forced to live in poverty.

Labour’s left will reinforce its campaign for the two-child limit on universal credit to be lifted.As for the £40 billion that the government needs to find in the budget on October 30 to avoid austerity - which I discussed on last night’s News at Ten as the driver for big planned rises in employers’ national insurance and capital gains tax basic rate - the low inflation is a double-edged sword.

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On the one hand, it should limit the growth in welfare spending.

On the other, it means the controversial cash freeze in tax thresholds is worth correspondingly less in real or inflation-adjusted terms.

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