Britain's Benefits Bill Surges £1.7 Billion Due to Inflation

Taxpayers in Britain are facing an extra £1.7 billion burden as benefits spending surges due to inflation, according to a warning from the Institute for Fiscal Studies (IFS). The IFS said that price rises, driven by the Iran conflict, are putting enormous pressure on Chancellor John Healey ahead of his Budget.

Inflation hit 2.9 per cent in the year to July, significantly overshooting the Bank of England's two per cent target. The Office for Budget Responsibility had forecast a lower inflation rate of 2.1 per cent before the war broke out.

The IFS estimates that if inflation holds at current levels into the autumn, Chancellor Healey would need to find an additional £1.7 billion from 2027-28 onwards to cover higher benefits payments linked to rising prices. The total additional burden on the public purse could reach as much as £4.7 billion.

The largest single hit falls on the Government's debt interest payments, which could swell by up to £2.3 billion if inflation stays close to its current level. Public sector pensions would cost roughly £700 million more at current price levels.