CPI inflation rose by 10.1% in September – due to soaring food prices – which should lead to a significant increase in benefits next April that will help support families through the crisis current cost of living, the Resolution Foundation said today (Wednesday). .

The Foundation notes that inflation in September was driven by rising food prices, which are rising at their fastest rate since 1989, and partially offset by falling gasoline prices (which have since stabilized ). While goods producer price inflation (PPI) is falling, the acceleration in services PPI (from 5.4 to 6.6%) is of concern as these price pressures do not seem related to rising energy costs and may instead reflect more persistent inflation.

Today’s inflation data is important because it would normally be used to boost state benefits and pensions next April. This is particularly crucial in the context of the current cost of living crisis, with household income set to fall rapidly again next year, even with an increase in benefits.

The Foundation notes that existing energy bill support – including lump sum payments, the £400 energy bill rebate and energy price guarantee – are all due to expire next April at a time when energy bills could effectively double to around £4,000 and paying for packages will drop further. In these difficult times, millions of families will need a stronger safety net to support them.

However, the government is reportedly considering increasing benefits based on income rather than price (a 5.5% increase, up from 10.1%) as a way to cut public spending.

The Foundation notes that this would save £5.6bn next year if applied to pensioners’ benefits (State Pension and Pension Credit) and a further £2.4bn if applied. was applied to ‘unprotected’ working-age benefits (including Universal Credit but excluding Disability Living Allowance and Personal Independence Payments).

The cost of this reduction in the revaluation for families would be enormous. A disabled single adult on Universal Credit would lose £380, while a single working parent with one child would lose £478 and a working couple with three children would lose £978.

Industry Response

Chancellor of the Exchequer, Jeremy Hunt said:

“I understand that families across the country are struggling with rising prices and higher energy bills.

“This government will prioritize helping the most vulnerable while ensuring broader economic stability and spurring long-term growth that will benefit everyone.

“We have acted decisively to protect households and businesses from significant increases in their energy bills this winter, with the government’s energy price guarantee limiting the spike in inflation.”

Jack Leslie, senior economist at the Resolution Foundation, said:

“Soaring food prices have led to a return to double digit inflation across Britain and high inflation is also likely to stay with us for some time, with producer price inflation accelerating. services and the early end of the energy price guarantee could put upward pressure on consumer prices next year.

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

“This is the context of debates within government over whether past commitments to increase benefits or price-based pensions should be the next U-turn to be announced. While significant Treasury savings may seem tempting in the context of its attempts to plug its fiscal hole, the cost to ten million working-age families and almost all pensioners would be enormous amid the deepest cost-of-living crisis in half a century.

Rebecca McDonald, Chief Economist of the Joseph Rowntree Foundation, said:

‘The Chancellor is committed to protecting the most vulnerable and has promised to act with compassion. With inflation over 10%, he could and should confirm today that the Government will increase benefits by this figure for s ensure that the incomes of the poorest do not fall because of a government decision.The government should advance the increases to reassure as soon as possible during the winter.

“The cost of living has millions of people fearing the future, with food prices rising faster than at any time since 1980. Any certainty they once had is now under threat. Surely this government cannot wish to be remembered for withholding money or stability from families when the basic benefit rate is already at its lowest in real terms in 40 years – and the prices frighten and alarm millions of people. The majority of the public believe that benefits should be adjusted in line with inflation.

“It is morally indefensible that the government is still considering leaving people with even less ability to pay for what they need, when their own party is committed to ensuring that the value of benefits follows the prices it only a few months ago. The Chancellor has the power to allay the fears of millions by confirming today that benefits will be increased in full and before April.

TUC General Secretary Frances O’Grady said:

“With inflation still high, the government needs to make sure every family can afford to put food on the table and keep them 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’s no wonder so many workers are seeking higher wages and taking action to reach fair wage deals.”

cost of living survey

The inflation figures follow today’s release by the TUC of a major new poll showing the impact the cost of living emergency is having on people.

Survey results include:

  • 1 in 7 people (14%) in the UK have to skip meals or starve themselves to make ends meet.
  • More than half (55%) of the population is reducing its consumption of heating, hot water or electricity.
  • 1 in 12 respondents (8%) say they have missed paying a household bill.
  • Almost 7 in 10 (68%) support raising the minimum wage to £15 an hour.

More poll figures are here: www.tuc.org.uk/news/1-7-skipping-meals-and-going-without-food-tuc-mega-poll-reveals

We must act on the cost of living and the threat of recession

The TUC says that to protect families from the soaring cost of living, and to protect against a drop in spending leading to a steeper fall into recession, the government must:

  • Stick to plans to increase Universal Credit, benefits and pensions in line with inflation, and bring that increase forward to before April. This must be the first step on the road to higher levels of universal credit, benefits and pensions.
  • Impose a much higher windfall tax on oil and gas companies.
  • Raise wages across the economy by supporting unions and allowing unions to negotiate wage increases across entire industries.
  • Give key workers in the public sector wage increases based on the cost of living.
  • Raise the minimum wage to £15 an hour as soon as possible.

Joshua Raymond, director of online investment platform XTB.com comments:

“UK inflation rose faster than expected to 10.1% in September, against market expectations of 10%. The biggest contribution to this inflation rise came from food and non-alcoholic beverages , which rose from 13.1% in August to 14.6% in September. This is the fourteenth consecutive monthly increase in annual food inflation, as prices continue to rise at an alarming rate. This creates even more problems for families coping with their weekly groceries becoming more expensive with each passing month and with mortgage rates rising at their fastest pace in years, the cost of living crisis is well and truly entrenched in the British economy.

Perhaps equally troubling is core inflation, which excludes food and energy prices and also rose faster than expected at 6.5%. This shows that inflationary pressures remain broad and deep. The Bank of England expects inflation to peak at 11% in the coming months, but these reports could show there is still room for inflation to rise above that figure, especially given given the weakness of the pound relative to its historical value.

This adds even more pressure on the Bank of England to raise interest rates faster and harder when it meets early next month. This reading likely locks in a minimum 1% upside at the next MPC meeting.

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