Chancellor George Osborne has announced a blow for benefits recipients, with many handouts rising by less than the rate of inflation.

Key working age benefits, including jobseekers' allowance, will rise by just 1% for the next three years, meaning a reduction in real terms.

Other benefits that will get the 1% increase include employment support allowance, income support, maternity allowance, statutory sick pay, statutory paternity pay and statutory adoption pay.

But the Chancellor said he would protect the vulnerable by continuing to increase carer benefits and disability benefits in line with inflation.

Rises in local housing allowance rates, which are used to decide housing benefit for private tenants, will be capped at 1% in 2014 and 2015.

Citizens Advice chief executive Gillian Guy says: "Holding down benefit increases to 1% is better than a total freeze, which would have been disastrous for people on the lowest incomes who are already having to spend a higher proportion of their income on essentials when rents, food and heating bills are all rocketing."

Inflation link gone

Most benefit rises, which happen each April, had previously been pegged to the previous September's Consumer Prices Index (CPI) inflation measure, which was revealed as 2.2% earlier this year.

The exception is the basic state pension, which is protected by a guarantee which ensures the rise will be the higher of the average rise in earnings, CPI, or 2.5%.

Ministers are understood to have been eyeing an end to the link with prices since it delivered a 5.2% uprating in April this year due to higher-than-expected inflation the previous autumn.