Inflation hits 40-year high of 9% amid cost of living crisis
ITV News Business and Economics Editor Joel Hills takes a closer look at how inflation is affecting businesses and everyday shopping items
Inflation has hit a 40-year-high as energy bills soar and the cost-of-living crisis surges.
Consumer Prices Index inflation, the rate at which prices are rising, rose to 9% in the year to April, up from an already high 7% in March, the Office for National Statistics said.
Around three quarters of the rise is accounted for by the 54% hike in the energy price cap which kicked at the start of April and was equivalent to a £700-a-year rise in the average household's energy bill, the ONS said.
And the cost-of-living is being driven higher by Russia's ongoing war in Ukraine, which has led to higher food and fuel prices.
Inflation is the rate of increase in prices for goods and services. If a loaf of bread costing £1 rises in price by 5p, the bread inflation is 5%.Grant Fitzner, chief economist at the ONS, said "around three-quarters of the increase in the annual rate this month came from utility bills."
Chancellor Rishi Sunak has said the government "cannot protect people completely" from the global challenge of higher energy prices.
Prices are rising in almost every category of goods and services at a rate that will cause real concern, as Joel Hills reports
He added the government was "providing significant support where we can, and stand ready to take further action."
“We’re saving the average worker £330 a year through reducing National Insurance Contributions, changing Universal Credit to save over a million families around £1,000 a year, and providing millions of families with £350 each this year to help with their energy bills," the chancellor said.
But the rise would be a "huge worry for families already stretched," according to shadow chancellor Rachel Reeves, who said Labour will call for a vote in parliament on an emergency budget to help struggling families and pensioners.
The emergency vote comes after Tory MPs voted down a windfall tax on energy companies on Tuesday.
“We can’t wait any longer for action from this out of touch government,” the shadow chancellor told BBC Breakfast.
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'Real chance' of a recession this year
The "eye-watering" rise in inflation means there is a "real chance" of a recession by the end of the year, according to the British Chambers of Commerce.
BCC head of economics Suren Thiru called for Rishi Sunak to reverse the rise in National Insurance Contributions and cut VAT on business energy bills to 5% to mitigate some of the impact.
The last time Brits felt the force of inflation at 9% was in 1982, as ITV News Political Correspondent Daniel Hewitt reports
“The jump in UK inflation in April is eye-watering and underscores the growing cost-of-living crisis facing households and the damaging squeeze on firms’ ability to invest and operate at full capacity," he said.
“The scale at which inflation is damaging key drivers of UK output, including consumer spending and business investment, is unprecedented and means there is a real chance the UK will be in recession by the third quarter of the year," he added.
Poorest families hit the hardest
The poorest households will be hit hardest by the rise in inflation because they spend more of their total budget on gas and electricity bills, economic think tanks have said.
The Institute for Fiscal Studies said while inflation hit 9% in April, the rate experienced by the poorest household could be nearer 11%.
“In April, the bottom 10% of the population in terms of income faced a rate of inflation rate of 10.9%, which was three percentage points higher than the inflation rate of the richest 10%," analysis by the think tank’s Heidi Karjalainen and Peter Levell said.
“Most of this difference comes from the fact that the poorest households spend 11% of their total household budget on gas and electricity, compared to 4% for the richest households.”
Jack Leslie, senior economist at the Resolution Foundation think tank, called on the government to "provide further targeted support for those lower income families at the sharp end of this crisis.”