UK inflation back to double-digits as price rises hit 10.1%

  • The increase in the cost of living jumped more than expected to a 40-year high

  • Food and energy bills were the main drivers with the former soaring by 14.5% compared to last September

  • September’s figures are important because of their benchmarking to the state pension and some benefits

  • Read the full article below for more details on how UK households are being squeezed

inflation A shopper puts fruit in her basket in a supermarket in London, Wednesday, Aug. 17, 2022. The UK inflation rate has hit 10.1% in the year to July, new figures from the Office for National Statistics have shown. The figure is up from 9.4% in June and is at its highest level in more than 40 years. (AP Photo/Frank Augstein)
Food and drink price inflation has hit its highest level since April 1980. Photo: Frank Augstein

Inflation in the UK has risen to 10.1% as the cost of living crisis continues to squeeze households, according to the Office for National Statistics (ONS).

The inflation figure for September has returned to July's high of 10.1%. This set a 40-year record because the last time it had gone over 10% was in February 1982 when it reached 10.2%.

The price rises were driven up by the surge in gas and electricity bills over the last year, and the jump in food and drink costs.

This is a slight increase from August when it was 9.9% and just above forecasts of 10%. On a monthly basis, consumer prices rose by 0.5% in September, which is the same as in August.

Inflation is the increase in price of something over time. For example, if a bottle of milk costs £1 one year and £1.10 the next year, then that's an annual inflation rate of 10%.

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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.”

Food and drink price inflation has hit its highest level since April 1980. The figures show that food and non-alcoholic beverage prices rose by 14.6% over the last year, up from 13.1% in August.

Food inflation has now risen for the last 14 months, up from negative 0.6% in July 2021.

The largest upward effects came from bread and cereals, meat products, and milk, cheese and eggs in September.

Chancellor Jeremy Hunt said the government would prioritise help for the amid uncertainty that Downing Street will increase benefits by the rate of inflation.

The 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.

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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.”

September's figure is also used for reviewing the triple-lock pension commitment.

The triple-lock means pensions will rise by either average earnings, CPI inflation based on September's rate, or 2.5% - whichever is highest.

With average earnings most recently hitting 5.4%, the triple lock should ensure pensions rising by the inflation rate in April next year.

TUC general secretary Frances O’Grady urged Liz Truss and Jeremy Hunt to guarantee that benefits will rise in line with September’s inflation reading:

“With inflation still running high, the government must make sure that every family can afford to put food on the table and keep warm this winter.

“But millions of people are already skipping meals and turning off the heating. Yet the prime minister and chancellor still refuse to confirm that universal credit, pensions and benefits will keep up with inflation.

“It is no wonder so many working people are seeking higher wages and taking action to win fair pay deals.”

Age UK’s charity director Caroline Abrahams warned that failing to keep the triple-lock promise to increase the state pension in line with inflation would be “devastating” and a “flagrant breach of trust”.

She said: “The rising rate of inflation announced today only strengthens the case for reinstating the triple lock which, let’s not forget, was introduced to protect pensioners from the kind of hardship that many are facing now, and that even more will face over the next few months.”

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Jack Leslie, senior economist at the Resolution Foundation think tank, which specialises in work on living standards, said family incomes “will continue to fall sharply”.

“Surging food prices have driven a return to double-digit inflation across Britain and high inflation looks set to stay with us for some time too, with accelerating services producer price inflation and the early end of the energy price guarantee likely to put upward pressure on consumer prices next year,” the economist said.

“This bleak outlook means that family incomes will continue to fall sharply again next year, especially as support with energy bills is withdrawn.

“That is the context of debates within Government about whether previous commitments to uprate benefits or pensions in line with prices should be the next U-turn to be announced.

“While the significant Treasury savings may look tempting in the context of its attempts to fill its fiscal hole, the cost to ten million working age families and almost every pensioner would be huge amid the deepest cost of living crisis for half a century.”

Sarah Coles, senior personal finance analyst, Hargreaves Lansdown, said: “Inflation is back in double figures, rising at almost twice the rate of wages, and stretching us all to breaking point. People on the lowest incomes wait in limbo to see whether their benefits will get the boost they need to stop their finances plummeting over a cliff edge. Meanwhile, those on average incomes are facing an increasingly impossible challenge every month to make ends meet, and anyone with savings is watching inflation eat their money alive. Fortunately, for savers at least, there’s more positive news.

The figures come as one in seven people in the UK are skipping meals or going without food, according to new polling data released by the Trades Union Congress (TUC).

The data from an MRP poll by Opinium reveals that more than half of British people are cutting back on heating, hot water and electricity in the cost of living squeeze, and one in 12 have missed the payment of a household bill.

Watch: How does inflation affect interest rates?