Government ‘won’t take risks with living standards’ says PM as inflation jumps
The Government “will not take risks with people’s living standards” in the Budget next month, Prime Minister Andy Burnham said, after official figures showed another jump in inflation.
The Office for National Statistics (ONS) revealed that inflation accelerated to a five-month-high of 3.1% last month as higher fuel prices and airfares pushed up the cost-of-living for Britons.
The Prime Minister stressed that he is prepared to take “difficult decisions” on the economy to ensure that it “remains on track”.
He insisted that the economy is still showing “resilience across the board” as he linked to the inflation uptick to the war in the Middle East.
The official data comes amid warnings from economists that inflation will continue to swing higher over the coming months, with increases in interest rates also predicted.
Households are also expected to face another rise in their energy bills from next month, adding to pressure on consumer finances ahead of the autumn Budget.
The Office for National Statistics (ONS) said Consumer Prices Index (CPI) inflation increased to 3.1% in August, compared with 2.9% in July.
It was in line with predictions from economists and points to an upward trajectory for inflation since striking a 15-month-low of 2.6% in June.
It therefore moved further away from the Bank of England’s 2% inflation target, ahead of the central bank’s latest interest rate decision on Thursday.
Many economists have suggested the Bank is still likely to keep interest rates – which help dictate mortgage and loan rates – at 3.75%, but that hikes are likely in future months.
Forecasts for higher inflation will increase pressure on the Government to consider measures to alleviate the rising cost of living in next month’s autumn Budget.
Andy Burnham said the Chancellor John Healey would use the “highest degree of prudence” on the economy, but also said he would look to protect living standards.
He said: “It is going to be challenging, because the picture around the world is challenging, particularly the situation in the Middle East, and we will look carefully at all those things.
“We won’t take risks with people’s living standards or with the economy as a whole, so we will take it all into account.
ONS chief economist Grant Fitzner said: “Sharp price rises for petrol and diesel pushed inflation up again in August.
“Higher airfares, particularly for long-haul journeys, also contributed to the increase.”
Motor fuels contributed significantly to the rise in inflation, after the average price of petrol rose by 9.1 pence per litre between July and August, to an average of 161.3 pence per litre.
The price of diesel rose by 14.2 pence per litre to an average of 181.8 pence per litre for the month.
The jump in fuel costs highlights the early impact of the breakdown of the US-Iran ceasefire in July, which led to a fresh uptick in oil and gas prices.
Elsewhere in the transport sector, the latest figures also showed a 6.2% increase in airfares for the month after an increase in the cost of long-haul flights.
Meanwhile, food and drink inflation remained steady at 1.3% despite warnings that it could be pushed higher by rising energy costs.
Chancellor John Healey said: “The war in the Middle East is impacting on inflation worldwide, not just here at home, in our bills, our weekly shop and at the petrol pumps.
“We have taken early action to help give families and businesses breathing space, by cutting tax on electricity bills, capping bus fares at £2 and lowering rates for pubs, social clubs and live music venues.
“Despite this serious global uncertainty, our UK economy is proving resilient, and our determination to deliver growth in every postcode continues.”
Households are expected to face further pressure from rising bills, with experts at Cornwall Insight predicting a 4% increase to bills from October 1, with an even sharper rise predicted in January.
Thomas Pugh, chief economist at RSM UK, said: “The rise in inflation in August is just the start of a new upward trend as higher energy, food and memory chip prices continue to make their way through supply chains.
“We now see inflation peaking at almost 4% in early 2027, before gradually dropping back to 2% in 2028.”
Martin Sartorius, lead economist at the CBI (Confederation of British Industry), said: “Given the limited signs of a pick-up in domestic price pressures, the Bank of England’s Monetary Policy Committee is likely to keep interest rates unchanged at its next meeting.
“However, the renewed rise in energy prices means that the committee will be increasingly alert to the risk of these costs feeding through to persistently elevated inflation.”
The data also showed that Consumer Price Index including Housing (CPIH), the ONS’s preferred measure of inflation, rose to 3.3% for August from 3.1% last month.
Meanwhile, Retail Prices Index (RPI) inflation rose to 3.4% from 3.2% in July.
Published: by Radio NewsHub