Inflation rate down

The pace of price rises in the UK slowed in September, pushing the inflation rate down to its lowest level for nearly three years.

The Consumer Prices Index (CPI) measure of inflation stood at 2.2%, down from 2.5% in August.

The CPI level in September is usually used to work out the rise in a range of benefits from Jobseeker's Allowance to income support in April next year.

But the basic state pension will rise by a minimum of 2.5%.

This is the result of a government guarantee and would see the state pension increase by at least £2.69 a week.

The Office for National Statistics (ONS) said that the Retail Prices Index (RPI) measure of inflation, which includes mortgage payments, stood at 2.6% in September down from 2.9% the month before.

The Treasury said September's fall would bring "welcome relief to the budgets of families and businesses".

The final level at which various benefits will rise in April will be decided by Chancellor George Osborne and announced in December. However, he is guided primarily by the September CPI inflation rate.

The CPI level was much lower than the rate seen in September 2011, when it stood at 5.2%.

This meant that a variety of benefits, such as disability and maternity benefits, rose by 5.2% in April this year. So, the uprating of these benefits is likely to be much lower in April 2013.

The chancellor has already said that he is likely to look again at the rise in Jobseeker's Allowance, as he was keen to see those in work seeing greater reward than those out of work.

The CPI rate of inflation was at its lowest rate since November 2009. The slowdown in inflation was the result of gas and electricity price rises in 2011 falling out of the comparison calculation.

However, the ONS said the recent spate of energy bill increases would put pressure on inflation as time went on. This was likely to lead to similar increases in inflation as seen last year, when utility price increases added 0.45% to CPI, the ONS said.

Rising fuel prices also put upward pressure on CPI in September, when petrol rose by 3.9p a litre between August and September compared with a fall of 0.3p a year ago.

A number of groups have pointed to the energy price rises as a worry for future inflation levels.