Many benefits will be increased at a lower level than the rising cost of living, George Osborne has announced.

Many working-age benefits will go up by 1% in each of the next three years, lower than both the current rate of inflation and the rate experts predict.

The Treasury’s welfare bill will be increasingly cut as a result, cutting it by £3.7bn in 2015-16.

Some other payments, such as disability benefits, will not be affected as they are governed by other rules.

And the state pension will rise by 2.5%, or £2.70 a week, taking the payment to £110.15 a week.

The rate of consumer prices index (CPI) inflation in September – which stood at 2.2% this year – is often used to work out the rise in a range of benefits from the following April.

In April 2012, a variety of benefits, such as disability and maternity benefits, rose by 5.2%, because CPI inflation was 5.2% in September 2011.

However, the rise in these benefits will be much lower in April 2013. Some, such as carer benefits and the disability element of tax credits, will go up by 2.2%, but other benefits will only rise by 1%, Mr Osborne announced.

They include Jobseeker’s Allowance, employment and support allowance, and income support, as well as maternity, paternity and adoption pay for those in work, and maternity allowance for those out of work.

“We have to acknowledge that over the last five years those on out of work benefits have seen their incomes rise twice as fast as those in work,” the chancellor said.

Mr Osborne said the benefits would rise by 1% for the next three years, irrespective of the level of inflation.

The most recent CPI figure was from October, when it was 2.7%.

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