UK inflation returns to 40-year high of 10.1%
Jeremy Hunt declined to confirm that the UK government would increase pensions and benefits in line with inflation on Wednesday as the crucial September figure rose back to its 40-year high of 10.1 per cent.
The rate of CPI inflation rose from 9.9 per cent in August, driven by the highest food price increases in decades and exceeding economists’ expectations.
The new UK chancellor came under fire early on Wednesday for not pledging, as normal, to use the September CPI inflation rate to increase pensions and benefits the following April.
Responding to the figures on Wednesday morning, Hunt said: “This government will prioritise help for the most vulnerable while delivering wider economic stability and driving long-term growth that will help everyone”. He made no comment on uprating benefits.
At more than five times the Bank of England’s 2 per cent target, the double digit inflation rate will also add to pressure on the central bank for a large interest rate rise on November 3.
The BoE will need to weigh the additional price pressures against the government’s U-turns on unfunded tax cuts and less generous relief on household energy costs, which will reduce medium-term pressures on prices.
The Liberal Democrats’ Sarah Olney said that Liz Truss needed to confirm the uprating in parliament later on Wednesday. “Not one penny can be lost, to do so would be gross negligence and failure of our most vulnerable members of society,” she said.
Sir Steve Webb, the former pensions minister and a partner at Lane Clark & Peacock, said pensioners receiving the new state pension would lose £442 a year if it was uprated in line with earnings rather than prices.
George Dibb, head of the Centre for Economic Justice at the IPPR think-tank, said the “steeper rise in essentials such as food and drink where prices are now rising at over 14 per cent . . . underlines the need for greater support for the most vulnerable households this winter over and above the energy price cap”.
The details of the figures showed that there was an increase in the core index as well as higher food prices.
The core rate, excluding energy, food, alcohol and tobacco, rose from an annual rate of 6.3 per cent in August to 6.5 per cent in September.
The Office for National Statistics said the overall consumer price index rose 0.5 per cent in September compared with August, a larger increase over the month than in 2021 when the index rose only 0.3 per cent.
Darren Morgan, ONS director of economic statistics, said: “After last month’s small fall, headline inflation returned to its high seen earlier in the summer. The rise was driven by further increases across food, which saw its largest annual rise in over 40 years, while hotel prices also increased after falling this time last year”.
There had been a further small drop in petrol prices, offsetting the rise in other prices and downward contributions from airfares and second-hand car prices.
Paul Dales, chief UK economist at Capital Economics, said the rate of inflation would rise to 10.5 per cent in October and to 11 per cent in April once the government’s energy price guarantee expired.
“Today’s release highlights the danger that underlying inflation remains strong even as the economy weakens,” he said.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the “MPC still is a long way from being able to claim victory,” over inflation, but urged the central bank to worry more about “weakening consumer demand and emerging slack in the labour market” than the current high level of inflation.