Office for National Statistics (ONS) data shows that inflation has risen above 10% for the second time this year, with the consumer prices index rising to 10.1% in September from 9.9% in August.
Soaring prices for food and drink were the biggest driver behind the latest cost of living increase, with an annual rise of almost 15%.
Inflation in September was driven by rising food prices, which are rising at their fastest rate since 1989, and partially offset by falling petrol prices (which have since stabilised). While producer price inflation (PPI) for goods is falling, the acceleration of services PPI (from 5.4 to 6.6 per cent) is a concern as these price pressures do not look related to rising energy costs, and may instead reflect more persistent inflation.
ONS director of economic statistics Darren Morgan said “After last month’s small fall, headline inflation returned to its high seen earlier in the summer.”
“These rises were partially offset by continuing falls in the costs of petrol, with airline prices falling by more than usual for this time of year and second-hand car prices also rising less steeply than the large increases seen last year.”
“While still at a historically high rate, the costs facing businesses are beginning to rise more slowly, with crude oil prices actually falling in September.”
The Resolution Foundation says that the inflation data is important as it would ordinarily be used to uprate benefits and state pensions next April. Doing so is particularly crucial in the context of the ongoing cost-of-living crisis, with household income set to fall fast again next year even with higher benefit support.
Existing energy bills support – including lump sum payments, the £400 energy bills rebate and the Energy Price Guarantee – is all due to expire next April at a time when energy bills could effectively double to around £4,000, and pay packets will still be shrinking. In these tough times, millions of families will need a stronger safety net to help them through.
However, the Government is reportedly considering uprating benefits by earnings rather than prices (a 5.5 per cent rise, compared to 10.1 per cent) as a way to cut public spending. The Resolution Foundation says that the cost of this uprating cut to families would be stark. A single disabled adult on Universal Credit would lose £380, while a working single parent with one child would lose £478, and a working couple with three children would lose £978.
Jack Leslie, Senior Economist at the Resolution Foundation, said “Surging food prices have driven a return to double-digit inflation across Britain and high inflation looks set to stay with us for some time too, with accelerating services producer price inflation and the early end of the Energy Price Guarantee likely to put upward pressure on consumer prices next year.”
“This bleak outlook means that family incomes will continue to fall sharply again next year, especially as support with energy bills is withdrawn.”
“That is the context of debates within Government about whether previous commitments to uprate benefits or pensions in line with prices should be the next U-turn to be announced. While the significant Treasury savings may look tempting in the context of its attempts to fill its fiscal hole, the cost to ten million working age families and almost every pensioner would be huge amid the deepest cost of living crisis for half a century.”
Commenting on the rise, Joanna Elson, Chief Executive of the Money Advice Trust said “The sustained impact of high prices for food, fuel and energy are already taking its toll on millions of households – and today’s rise in inflation shows there is no let-up in sight.”
“For people on low incomes, whose budgets simply can’t stretch any further, the effects are being felt most keenly. At National Debtline we have already seen a rise in callers who do not have enough coming in to cover essential costs and this situation is only set to get worse in the coming months.”
“It is now more vital than ever that the government commits to raising benefits by inflation – to give millions of families the reassurance they need.”