Inflation Could Push UK Welfare Expenditure by £1.7bn

The Institute for Fiscal Studies has warned that Britain's welfare expenditure could rise by £1.7bn if inflation persists at its current rate of 2.9%. This would put additional pressure on Chancellor John Healey ahead of the Budget.

Average price growth in July reached 2.9%, exceeding the Bank of England's 2% target. Forecasters predict that inflation will continue to rise, potentially surpassing 3%, amid US economic measures against Iran.

The IFS noted that a 2.9% inflation rate would lead to an additional £1.7bn in benefit increases starting in 2027-28 if benefits are adjusted according to price movements. This sum is equivalent to the cost of over 20 new fighter jets or wages for 25,000 soldiers.

The government's debt-interest obligations could also grow by up to £2.3bn if inflation remains high, adding to the Chancellor's financial burden.