IFS analysis: Welfare bill could rise by £5.5bn in 2027 due to inflation
What happened
Analysis by the Institute for Fiscal Studies, using forecasts from the Office for Budget Responsibility, suggests Britain’s welfare bill could rise by an additional £5.5bn in 2027. This projected increase in benefit spending could exceed the Treasury’s existing budget assumptions by £2.2bn. The rise follows official figures showing inflation accelerated to 3.5 per cent in September, up from 3.1 per cent in August.
Why it matters
The September inflation rate is important because it determines the uprating of working-age benefits and the state pension the following April. This prospect of a larger welfare bill threatens to become a flashpoint ahead of John Healey’s maiden Budget, as the Treasury has limited room to absorb unexpected spending pressures.
Who's involved
- Institute for Fiscal StudiesUK research institute that conducted the analysis on economic pressures
- Office for Budget Responsibilityadvisory body whose forecasts were utilized in the IFS analysis
- Jeremy Huntpolitician facing pressure regarding his maiden Budget due to spending demands
- Rachel Reevescurrent Chancellor of the Exchequer whose economic policies are guided by fiscal constraints
Who could feel it
Possible knock-on effectsThese are possibilities Brind reasoned out, not predictions, and not advice. Most are not stated in any report.
- Department for Work and PensionsSpeculative
The Department for Work and Pensions might face increased costs for benefit payments due to inflation.
Keep exploring
The entities involved
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Institute for Fiscal Studies
UK research institute
Nothing else this week.
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Office for Budget Responsibility
an advisory non-departmental public body