Inflation up as eat out incentive ends

UK inflation was pushed higher last month as the end of the Government’s Eat Out to Help Out scheme saw restaurant and cafe prices bounce back, according to official figures.

The Office for National Statistics (ONS) said Consumer Prices Index (CPI) inflation rose to 0.5% in September from 0.2% in August.

It came as Eat Out to Help Out finished at the end of August, which had helped push inflation to its lowest level for nearly five years.

Jonathan Athow, deputy national statistician at the ONS, said: “The official end to the Eat Out to Help Out scheme meant prices for dining out rose during September, partially offsetting the sharp fall in inflation for August.

“Air fares would normally fall substantially at this time due to the end of the school holidays but with prices subdued this year, as fewer people have been travelling abroad, the price drop has been less significant.

“Meanwhile, as some consumers look for alternatives to using public transport, there was an increased demand for used cars, which saw their prices rise.”

The September figure is used to decide the annual increase in business rates.

While retail, leisure and hospitality firms have been given a one-year business rates holiday, this is set to end on March 31, just before the new rate kicks in on April 1.

September’s CPI is also used in the calculation for state pensions, although the triple-lock rule means the payout will be the highest figure out of CPI, earnings growth for the year to July, or 2.5%.

State benefits are likewise decided by the September inflation figure, meaning payments will rise 0.5% next April, which is far less than this year’s 1.7% increase.

Commenting on the latest inflation figures, Debapratim De, senior economist at Deloitte, said: “We remain in a deflationary environment, with rising unemployment, weak wage growth and abundant spare capacity. This should maintain downward pressure on inflation, especially as rising Covid-19 cases and tighter local restrictions lead to a renewed squeeze on demand and activity.”

Howard Archer, chief economic adviser to the EY Item Club, added: “Consumer price inflation rose back up to 0.5% in September, after falling to 0.2% in August – the lowest level since January 2016 – from a four-month high of 1.0% in July.

“Inflation had previously trended down to a then-low of 0.5% in May from a sixmonth high of 1.8% in January.

“At 0.5% in September, consumer price inflation was more than one percentage point below the Bank of England’s 2.0% target rate.

“Inflation was significantly lifted in September by the ending of the Government’s Eat Out to Help Out discount scheme which ran throughout August and had been a major factor in the fall in inflation compared to July.

“There was also an appreciable upward impact from transport prices (the first positive contribution since March), as they were lifted by air fares falling less than normal between August and September. There was also a modest upward impact for higher prices for second- hand cars.

“Average petrol prices stood at 113.3p per litre in September 2020, up from 113.1p in August but below 1 2 7. 3 p recorded in September 2019.”

FOOD FOR THOUGHT: The Eat Out to Help Out scheme offered up to £10 off a meal, boosting the hospitality sector.