Annual benefit increase have been linked to the previous September’s inflation rate for the past two decades.
However, with inflation raising to 5.2 per cent this September, it has been reported in The Times newspaper that ministers are planning to use a lower rate of 4.5 per cent, based on average inflation in the six months running up to September.
Charities have condemned the plans, saying it will be a further blow to families on low incomes.
Helen Dent, chief executive of charity Family Action, 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.
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