Inflation jumps to new high of 11.1%
New rate hits 41-year record as food prices alone leap by 16.2%
INFLATION surged past expectations last month to hit a 41-year high of 11.1 per cent.
As the price of food and energy soared, the year-on-year rise in the cost of living jumped from 10.1 per cent in September, according to the Office for National Statistics (ONS).
Food inflation of 16.2 per cent was the highest since 1977, while inflation in housing and household services – which includes energy – hit 26.6 per cent, the highest since 1991. Between September and October alone, the cost of living rose by 2 per cent, the same jump as for the entire year to July 2021.
The latest inflation data will cause a headache for Chancellor Jeremy Hunt as he puts the finishing touches on his Autumn Statement, due today. Mr Hunt said: ‘The aftershock of Covid and Vladimir Putin’s invasion of Ukraine is driving up inflation in the UK and around the world. This insidious tax is eating into pay cheques, household budgets and savings, while thwarting any chance of longterm economic growth.’
Today’s Budget, he added, would ‘set out a plan to get debt falling, deliver stability and drive down inflation while protecting the most vulnerable’. It came as Rishi Sunak said spiralling inflation was the ‘enemy that we need to face down’.
Speaking at a G20 summit in Bali, the Prime Minister acknowledged that inflation was ‘ eating into people’s living standards’ and said: ‘My absolute No 1 priority is making sure that we deal with the economic situation that we face at home.’
Separate data from the ONS showed house prices were still on the rise, despite the cost of living crunch and higher mortgage rates.
Average house prices increased by 9.5 per cent in the year to September, to £295,000, though the rate of growth slowed from the 13.1 per cent leap seen in the year to August.
Experts have warned that the housing market could hit a wall next year, and prices could even fall as mortgage rates creep up.
Karen Noye, mortgage expert at Quilter, said: ‘It is no surprise that the housing market is stalling, considering the magnitude of the diffi
‘Poorer families getting hit harder’
culties facing people’s finances as we head into winter.
‘As the autumn has so far been mild, the true cost of the energy price hikes have not been felt in full force and, along with the increases in interest rates pushing up some people’s mortgage payments, it is set to be a difficult time for many.’
Liz Truss’s Energy Price Guarantee came into force in October, taking the typical annual household energy bill from £1,971 to £2,500, although this was less than it would otherwise have been.
While inflation is punching a hole in budgets across the spectrum, the data from the ONS showed how badly it was affecting low-income families. The rise in their cost of living was 11.9 per cent, compared with 10.5 per cent for high-income households.
This is because poorer families are forced to spend a higher proportion of their income on essentials, such as energy and food. Victoria Scholar, of investment platform Interactive Investor, said: ‘Poorer families are unfairly getting hit harder, with the inflation gap between high- and lowincome households reaching the widest since March 2009.’
Jack Leslie, senior economist at the Resolution Foundation think-tank, said: ‘Everyone in Britain is affected by double-digit inflation – which has
caused pay packets to shrink at record rates. But some groups are more affected than others, and Britain now has a significant cost of living gap between rich and poor households.’
The Bank of England has been hiking its base interest rate at a record pace since last December.
It has been criticised for failing to act sooner, although its governor Andrew Bailey told MPs on the Treasury select committee yesterday that this was ‘not plausible’. Mr Bailey, who has foregone a pay rise every year since he took over in 2020, said he would do so again next year.
‘If I were offered one, I would not accept it and I would politely decline as I have done before.’