Welfare spending will be cut in a further £6.6bn savings package, the chancellor of the exchequer announced in the Autumn Statement today.
Working age benefits will be uprated by 1% for three years from April 2013 including jobseeker's allowance, employment and support allowance and income support and excluding disability and carers.Benefits were previously increased in line with inflation; this year that stood at 2.2%.
The decoupling of welfare spending from the rate of inflation is estimated by the government to save £3.7bn by 2016-17.
In the statement Osborne said: "Savings from Whitehall are not enough by themselves to tackle our debts. We need to find other savings - and we need to do it in a way that is fair.
"Those with the most should contribute the most, and they will. But fairness is also about being fair to the person who leaves home every morning to go out to work and sees their neighbour still asleep, living a life on benefits."
The chancellor said those working in the public services with frozen basic pay frozen will see a rise by an average of 1%, adding that a "similar approach" of a 1% rise should apply to those in receipt of benefits.
He said: "That's fair and it will ensure that we have a welfare system that Britain can afford. We will support the vulnerable.
"So carer benefits and disability benefits, including disability elements of tax credits, will be increased in line with inflation and we're extending support for Mortgage Interest for two more years.
"But most working age benefits including Job Seekers Allowance, Employment and Support Allowance and Income Support - will be uprated by 1% for the next three years."
The autumn statement document stated: "The welfare system must be affordable, help those who need it most and provide the right incentives for people to work.
"To ensure the overall affordability of the welfare system, the Government will uprate most working age benefits and tax credits, excluding disability and carers benefits, by 1 per cent for three years from April 2013. Pensioner benefits will not be affected."
The OBR confirmed that the government will miss the debt target in 2013.
The Autumn Statement 2012 set out a further £6.6bn package of savings in the spending review period made up from welfare, official development assistance(ODA) and departmental current spending.
Brendan Barber, general secretary of the Trades Union Congress (TUC), said of the statement: "When you are self-harming you should stop, not look for better sticking plasters.
"With the economy still scraping along the bottom, unemployment set to rise and the chancellor missing his own debt target, we need a fundamental change in direction, not more muddling through.
"Cuts, austerity and squeezed living standards stretch seemingly without end into the future. What is missing today is any vision of a future economy that can deliver decent jobs and living standards - it's pain without purpose."
'One of those unsung heroes of our industry'
'We need to pick up the pace'
'The real scare story is our society's lack of financial resilience'
Covid exclusion applies
Contestant: Is it... Insurance premiums?'