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| Why this month's inflation figure matters for you | Why this month's inflation figure matters for you |
| (about 1 hour later) | |
| The cost of living is always important to our finances but this month's has a particular extra impact for millions of people. | |
| Inflation, the rate at which prices increase, affects how much we pay in the shops, how much benefits and the state pension will rise and what happens to interest rates. | |
| The inflation figure published on Wednesday - 1.7% - is the one normally used by the government when setting the rise in benefits in April. | The inflation figure published on Wednesday - 1.7% - is the one normally used by the government when setting the rise in benefits in April. |
| It also comes just two weeks before this government's first Budget, with the chancellor warning there will be “difficult decisions” on welfare as well as tax and spending. | |
| Here are some of the ways in which it will directly affect you and your money. | |
| Universal credit and other benefits | Universal credit and other benefits |
| The amount paid in some benefits should, by law, rise at least in line with prices. | The amount paid in some benefits should, by law, rise at least in line with prices. |
| They include all the main disability benefits, such as personal independence payment, attendance allowance and disability living allowance, as well as carer’s allowance. | They include all the main disability benefits, such as personal independence payment, attendance allowance and disability living allowance, as well as carer’s allowance. |
| Others, including universal credit, the most common benefit which is claimed by seven million people, are expected to rise in line with the inflation rate, but that is a decision for ministers. | |
| Typically, September's Consumer Prices Index (CPI) measure of inflation is the benchmark for this uprating, which is 1.7%. | Typically, September's Consumer Prices Index (CPI) measure of inflation is the benchmark for this uprating, which is 1.7%. |
| In pounds and pence, it suggests that the standard allowance of universal credit, for a single person aged under 25, will go up by £5.30 a month to about £317. | In pounds and pence, it suggests that the standard allowance of universal credit, for a single person aged under 25, will go up by £5.30 a month to about £317. |
| For a couple aged over 25, the rise is likely to be £10.50 to £628 a month, according to investment platform AJ Bell. | For a couple aged over 25, the rise is likely to be £10.50 to £628 a month, according to investment platform AJ Bell. |
| However, it is worth remembering that the amount received in universal credit depends significantly on your circumstances, such as earnings, children, or disabilities. Adding 1.7% to your current benefit amount should give a fairly accurate estimate of what you will receive in April. | |
| Some 58% of universal credit claimants are women, and 38% of the total are working. | Some 58% of universal credit claimants are women, and 38% of the total are working. |
| It is expected that someone receiving attendance allowance, or the highest rate of personal independence payment, would see an increase of about £1.85 a week in April. | |
| The increase in benefits is less than the 6.7% rise in the April just gone, which reflected a higher rate of rising prices a year ago. | |
| Why the benefit rise could have been higher | Why the benefit rise could have been higher |
| Timing means the increase in benefits is set to be relatively small. | Timing means the increase in benefits is set to be relatively small. |
| September's inflation figure was lower than expected. | September's inflation figure was lower than expected. |
| Next month, a rise in energy bills, which took effect at the start of this month, is expected to push the inflation rate back up again when the next data is published in a month's time - too late for the link to benefits. | Next month, a rise in energy bills, which took effect at the start of this month, is expected to push the inflation rate back up again when the next data is published in a month's time - too late for the link to benefits. |
| The government, specifically the work and pensions secretary (no doubt working very closely with the chancellor), can decide to set a higher rate of increase for benefits. Charities would welcome such a move, but it would be extremely unlikely. | The government, specifically the work and pensions secretary (no doubt working very closely with the chancellor), can decide to set a higher rate of increase for benefits. Charities would welcome such a move, but it would be extremely unlikely. |
| Bigger increase for the state pension | Bigger increase for the state pension |
| The rise in the state pension in April is governed not only by inflation, but by what is known as the triple lock. | The rise in the state pension in April is governed not only by inflation, but by what is known as the triple lock. |
| Under that arrangement, the state pension goes up each year by either 2.5%, inflation, or earnings growth - whichever is the highest figure. | Under that arrangement, the state pension goes up each year by either 2.5%, inflation, or earnings growth - whichever is the highest figure. |
| This time around, the latest data has confirmed the highest is earnings growth - at 4.1%. This is expected to mean: | This time around, the latest data has confirmed the highest is earnings growth - at 4.1%. This is expected to mean: |
| The full, new flat-rate state pension (for those who reached state pension age after April 2016) is expected to increase to £230.30 a week. That will take it to £11,975 a year, a rise of £473 compared with now. | The full, new flat-rate state pension (for those who reached state pension age after April 2016) is expected to increase to £230.30 a week. That will take it to £11,975 a year, a rise of £473 compared with now. |
| The full, old basic state pension (for those who reached state pension age before April 2016) is expected to go up to £176.45 a week. That will take it to £9,175 a year, a rise of £361 compared with now. | The full, old basic state pension (for those who reached state pension age before April 2016) is expected to go up to £176.45 a week. That will take it to £9,175 a year, a rise of £361 compared with now. |
| It is worth noting that millions of pensioners will lose their winter fuel payment, worth up to £300, as a result of a government cut. | It is worth noting that millions of pensioners will lose their winter fuel payment, worth up to £300, as a result of a government cut. |
| Interest and mortgage rate cuts more likely | Interest and mortgage rate cuts more likely |
| As inflation is now below the Bank of England's 2% target, it paves the way for further interest rate cuts. | As inflation is now below the Bank of England's 2% target, it paves the way for further interest rate cuts. |
| That would make borrowing money less expensive, but could mean lower returns for savers. | That would make borrowing money less expensive, but could mean lower returns for savers. |
| Analysts say there is now a greater likelihood of an interest rate cut by the Bank in December, after a widely expected reduction from the current level of 5% in November. | Analysts say there is now a greater likelihood of an interest rate cut by the Bank in December, after a widely expected reduction from the current level of 5% in November. |
| That could give mortgage lenders more confidence to reduce the interest they charge on new fixed-rate home loans. | That could give mortgage lenders more confidence to reduce the interest they charge on new fixed-rate home loans. |
| Many people face higher monthly repayments, as rates are higher than many were accustomed to for a decade. | Many people face higher monthly repayments, as rates are higher than many were accustomed to for a decade. |
| Separate official figures show that people who are renting a home are paying 8.4% more than a year ago, external - displaying the continued financial squeeze on tenants. | Separate official figures show that people who are renting a home are paying 8.4% more than a year ago, external - displaying the continued financial squeeze on tenants. |
| Implications for the Budget | Implications for the Budget |
| There remains some nervousness among borrowers and consumers in general about what will happen in the Budget, announced by Chancellor Rachel Reeves on 30 October. | There remains some nervousness among borrowers and consumers in general about what will happen in the Budget, announced by Chancellor Rachel Reeves on 30 October. |
| Government sources have told the BBC that she is looking to make tax rises and spending cuts to the value of £40bn. | Government sources have told the BBC that she is looking to make tax rises and spending cuts to the value of £40bn. |
| Lower inflation can help or hinder the government. | Lower inflation can help or hinder the government. |
| It means that the Treasury may be left with a slightly lower than expected benefits bill. | It means that the Treasury may be left with a slightly lower than expected benefits bill. |
| However, lower inflation and wage rises could drag fewer people into higher rates of tax, even though the thresholds have been frozen. | However, lower inflation and wage rises could drag fewer people into higher rates of tax, even though the thresholds have been frozen. |
| This means the government could also gather less in tax as a result. | This means the government could also gather less in tax as a result. |
| Get in touch | Get in touch |
| Are you on benefits and concerned about this announcement on inflation? Get in touch | Are you on benefits and concerned about this announcement on inflation? Get in touch |