Vulnerable families will be pushed past breaking point if Chancellor George Osborne holds down the annual uprating of benefits, a charity warned today.
Unconfirmed reports in The Times today claimed that Mr Osborne is planning to slice £1 billion off the welfare bill by breaking a long-standing procedure under which benefits are upgraded each year in line with September's inflation rate.
Inflation hit 5.2% in September this year, creating a headache for the Chancellor, who was faced with the prospect of a larger-than-expected hike in the £200 billion welfare budget.
Treasury sources were today playing down as speculative claims that Mr Osborne plans to limit the upgrade to 4.5% - average inflation over six months to September - and has secured the agreement of ministers including Work and Pensions Secretary Iain Duncan Smith to do so.
The Times claimed that the savings - which would hit those claiming disability benefits, carer's allowance, income support and jobseekers' allowance by about £50 to £100 a year - would be used to halt a planned 3p-a-litre rise in petrol duties.
Mr Osborne is expected to announce the 2012/13 uprating - to come into effect next April - when he makes his autumn statement to Parliament on November 29.
The charity Family Action has warned that a failure to deliver the expected 5.2% increase at a time when soaring inflation is putting intense pressure on household budgets would create problems for many of the UK's poorest families.
Family Action chief executive Helen Dent said: "The most vulnerable are already being hammered by benefit cuts, slashed services and food and fuel inflation.
"A decision to break the link between inflation and welfare payments will put further pressure on families already at breaking point.
"We know that many of the families we work with are having to choose between a warm home and food on the table, and this will break some of them."
The Times predicted that pensions would be safeguarded, with a full 5.2% increase, in line with Prime Minister David Cameron's pre-election promises to protect benefits for older people.
But Ms Dent said: "The Government say that we are all in this together, so we don't see why pensioners are considered more deserving than disadvantaged parents struggling to provide and do their best for their children.
"The Government are failing a generation of young people and it looks like their family-friendly test has gone out the window."
Asked whether Mr Duncan Smith had given his backing to a limit on the benefit increase, a spokesman for the Department for Work and Pensions said: "We don't respond to speculation. The Chancellor will make his statement at the time announced."
TUC general-secretary Brendan Barber said: "Today's suggestion that the Chancellor won't honour the commitment to uprate benefits in line with September's inflation figures is extremely alarming.
"The cost of living has rocketed for those who depend on benefits more than any official measure captures. Not only does the Chancellor want to use CPI - the generally lower inflation measure that excludes important items like housing - it now seems that he may not even keep that promise.
"Those who depend on disability, carers and unemployment benefits are already facing higher inflation rates than others and now the Government wants to squeeze them even harder.
"In the week that youth unemployment went over a million, it is astounding that the Government is talking about reducing benefits for those who are out of work, and taking even more money away from those who have the least."