Chancellor Rishi Sunak said pensions and benefits will rise in line with inflation next year in what will be the biggest jump since 1991. The Resolution Foundation, an independent think tank, has calculated that the move will cost the Treasury £15 billion.
It comes as inflation soared to a 40-year high of nine percent in April as Brits face eye-watering energy bills and food prices amid the cost of living crisis.
Pensioners and benefit claimants are facing a real-terms cut this year after their payments only increased by 3.1 percent as the triple lock – which sees state pensions rise by the highest out of inflation, the average wage jump or 2.5 percent – was suspended in 2022.
Speaking on Friday, Mr Sunak said payments are set to increase in 2023 in line with this year’s inflation.
The Chancellor told BBC Breakfast: “Looking forward, what is likely to happen is that benefits and pensions next year will go up by this year’s much higher inflation levels.
“That is forecast to be much higher than the inflation that people will actually experience next year.
“So, for all those people they can look at next year and actually feel relatively confident about that.”
Mr Sunak made similar comments in an interview earlier this week with Money Saving Expert’s Martin Lewis.
He said: “I think people can judge me by my actions during the time I’ve had this job.
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“I’ve always been responsive to the situation that the country is going through, I’ve always had to act to support people where we can, make sure we help the most vulnerable and do that in a way that is responsible and ensures our country and economy is strong in the long term – and I will continue to act in that way.
“None of us know what energy prices are going to be next year but what I can tell you now and what people should be reassured by is that the way our system works, benefits and pensions next year are likely, subject to a review that has to happen legally, to go up by quite a significant amount because the inflation rate that decides that is set in September.
“That is likely to be a relatively high inflation rate in September, so that is what will happen next year for everyone’s benefits and pensions, and that increase is most likely to be significantly higher than the inflation we will see next year on all the forecasts that are currently available.
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“So that should give people an enormous sense of reassurance that we are providing the help today to help them get through to that point and that actually next year there is going to be an enormous easing as all their incomes go up considerably compared to what the increase in prices is.”
It comes after the Chancellor this week unveiled a £15 billion emergency package to support the country through the cost of living crisis.
Measures include an energy bill discount of £400 for all households from October.
Additional one-off payments of £300 will go to pensioners alongside the winter fuel payment this winter, at a cost of £2.5 billion.