Benefits claimants could be given a real terms pay cut as Jeremy Hunt tries to find money for pre-election tax cuts.
Ministers normally increase payments in line with the previous September’s inflation figures – which this year could be 7 per cent.
But the government did not deny that fugure could be squeezed, in anticipation of a fall in the headline rate later this year.
The chancellor is facing a difficult autumn statement in November, with little room for manoeuvre financially.
At the same time, however, he is coming under intense pressure from Tory MPs to offer a pre-election tax cut to voters in next Spring’s Budget.
Liz Truss’s allies have accused the chancellor of stealing one of her key idea’s to “kick start” economic growth when she was briefly prime minister.
In an incendiary attack, they also claimed that had he adopted the idea in last year’s autumn statement, the exchequer’s coffers would be more than £4 billion richer by now.
Mr Hunt and Mr Sunak have both repeatedly said that they want to cut taxes, when the economic picture allows.
They have taken a cautious approach, however. At the start of this year the prime minister said that voters were “not idiots” and instinctively knew what was affordable.
Access unlimited streaming of movies and TV shows with Amazon Prime Video
Sign up now for a 30-day free trial
Sign up
Access unlimited streaming of movies and TV shows with Amazon Prime Video
Sign up now for a 30-day free trial
Sign up
The economy continues to suffer from the after effects of the pandemic, the cost of living crisis and Ms Truss’s disastrous mini-Budget, which led her to be ousted from office by her fellow Tory MPs.
Ministers could try to use the widely predicted fall in inflation to justify the decision to squeeze benefits.
Rishi Sunak has made it one of his five key pledges to the electorate that inflation will halve by the end of the year, although he has been cagey about what exactly would constitute that figure.
A government spokesperson said: “In order to protect the most vulnerable from the impact of high inflation, the Government increased benefits by over 10 per cent this year.
“As is the usual process, the Secretary of State will conduct his statutory annual review of benefits and state pensions in the autumn, using the most recent data available.”
