ITV News' Rageh Omaar hears from consumer journalist Henry Wallop about the causes and impacts of such a high inflation rate
The government is vowing to prioritise "help for the vulnerable," as inflation resurges to a 40-year high in a rise driven by the largest food prices increase in decades.
The rate of Consumer Price Index (CPI) inflation rose to 10.1% in September from 9.9% in August, the Office for National Statistics (ONS) revealed this morning.
It was above the expectations of economists, who had predicted a figure of 10%.
The figure matches the 40-year high inflation hit in July and remains well above the government’s target of 2%.
The increase was driven by food prices, leaping by 14.5% compared with the same month last year, representing the largest annual rise since 1980, according to data modelling.
Meanwhile, housing and utilities costs leapt by 20.2% against the same month last year.
Commenting on the latest inflation surge, new Chancellor Jeremy Hunt said the government “will prioritise help for the most vulnerable while delivering wider economic stability.”
The September figure is usually used as the benchmark to raise benefits and the state pension, but the government has refused to confirm that payments will keep pace with rising prices.
Mr Hunt said: “I understand that families across the country are struggling with rising prices and higher energy bills.
“This government will prioritise help for the most vulnerable while delivering wider economic stability and driving long-term growth that will help everyone.
“We have acted decisively to protect households and businesses from significant rises in their energy bills this winter, with the government’s energy price guarantee holding down peak inflation.”
Economists at the ONS said rising transport prices slowed significantly last month on the back of cheaper fuel costs.
The Bank of England warned last month that inflation is expected to peak in October at just below 11%, following government support to freeze energy bills at £2,500 for an average household.
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. 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.
“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.”
September’s inflation reading will make important reading for the Treasury as it used to decide increases for a number of key policies.
For example, the CPI rate will be used as part of the Work and Pensions Secretary’s annual benefits uprating review.
If the government decides to uprate benefits by inflation, this is the percentage they will be increased by, this will come into effect from next April.
September’s inflation figure is also the one used by the department within the triple-lock pension commitment.
The triple-lock means pensions will rise by the highest of three figures: average earnings, CPI inflation based on September’s rate or 2.5%.
With average earnings most recently hitting 5.4%, it is widely expected that pensions would rise by the inflation rate in April next year.
However, on Tuesday, Downing Street indicated ministers could ditch their commitment to the triple lock as Mr Hunt looks for more cuts to fill the government’s financial black hole.
The inflation rate will also be used to decide the property tax increase facing high street firms.
Business rates for firms will increase by almost £2.7 billion England from April without government intervention, if inflation hits the predicted 10% figure.
Shadow chancellor Rachel Reeves said: “Inflation figures this morning will bring more anxiety to families worried about the Tories’ lack of grip on an economic crisis of their own making.
“It’s clear that the damage has been done. This is a Tory crisis, made in Downing Street and paid for by working people."
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