UK inflation jump calls for rise in pensions and benefits to match

theguardian.com:

For millions of people – pensioners and those eligible for state benefits – last month’s double-digit inflation figure is the one that really matters.

Each year the government uses the September increase in the cost of living as measured by the consumer prices index to calculate by how much pensions and benefits will rise the following April.

If it sticks to the standard formula, payments will go up by the full 10.1%, which translates into a rise of just over £1,000 a year for someone on a full state pension.

Tellingly, the government has refused to commit to a full uprating this year and is mulling over whether to increase pensions and benefits in line with the increase in earnings instead. These are currently rising at an annual rate of 6%.

Opting for the cheaper option would save the Treasury billions of pounds and be in keeping with the austerity message Jeremy Hunt has been giving nonstop since he became chancellor five days ago.

It would, though, cause real hardship for some of the least well-off people in the UK and would be certain to trigger a political backlash. Tory MPs would be particularly aware of the risks of alienating pensioners, given that they overwhelmingly voted for Boris Johnson in the 2019 election.

What’s more, a breakdown of the latest inflation figures from the Office for National Statistics provides evidence that the highest annual price rises in 40 years is having a disproportionate increase on the poorest. Poorer households spend more of their budget on food than richer households, and food prices have risen by more than 14% in the past year.

There is some tentative evidence that inflation – while still likely to rise further in October as a result of higher energy bills – could be close to a peak.