Rishi Sunak has pledged to make the fight against a rising cost of living his No 1 priority after surging energy bills sent the UK’s annual inflation rate to a 41-year-high of 11.1%.
Preparing the ground for tough action in Thursday’s autumn statement, the prime minister responded to the highest figure since October 1981 by describing inflation as an “enemy” that needed to be faced down.
Data from the Office for National Statistics (ONS) showed the annual inflation rate last month jumped a percentage point from 10.1% in September, despite help provided to households through the launch of the government’s energy price guarantee.
Dearer food also contributed to prices rising 2% in October alone compared with the previous month, a bigger increase than the Bank of England and the City had been anticipating. Milk, cheese and egg prices rose by more than 27% compared with a year earlier.
The annual inflation rate has more than doubled from its level of 4.6% a year ago, and is more than five times higher than the government’s 2% target. Core inflation, which strips out food, energy, tobacco and alcohol, remained unchanged at 6.5%.
The ONS said households were now paying 90% more for gas, electricity and other fuels than they were a year earlier. Food price inflation rose from 14.6% to 16.4% – its highest level since 1977.
The Resolution Foundation, a thinktank that focuses on issues affecting low- and middle-income families, said inflation was hitting the poor hardest.
“As lower-income households spend more of their budgets on energy bills and food their effective inflation rate is higher than average: 12.5% for the poorest tenth of households, compared with 9.6% for the richest 10%” it said.
The ONS said there had been some moderation in the pace of producer price inflation, which measures the fuel and raw materials costs faced by businesses as well as the cost of goods leaving factory gates.
Even so, the British Chambers of Commerce said an annual rise in business costs of almost 20% was unsustainable for many of its member companies, and was having a negative impact on confidence.
Responding to the figures, the chancellor, Jeremy Hunt, said: “We cannot have long-term, sustainable growth with high inflation. Tomorrow I will set out a plan to get debt falling, deliver stability, and drive down inflation while protecting the most vulnerable.”
skip past newsletter promotion
Sign up to Business Today
Free daily newsletter
Get set for the working day – we’ll point you to all the business news and analysis you need every morning
His Labour counterpart, the shadow chancellor, Rachel Reeves, said: “Inflation rising yet again will strike more fear in the heart of families across Britain dealing with soaring food prices, rising energy bills and a Tory mortgage premium on their home.”
The ONS said the introduction of the energy price guarantee for households, initially set for two years and since reduced to six months, limited the rise in electricity, gas and other fuels prices to 24.3% between September and October, with gas prices rising by 36.9% and electricity prices by 16.9%.
Without the guarantee, the rise would have been 75% and the overall annual inflation rate 13.8%, it added.
The ONS chief economist, Grant Fitzner, said: “Rising gas and electricity prices drove headline inflation to its highest level for over 40 years despite the energy price guarantee. Over the past year, gas prices have climbed nearly 130% while electricity has risen by about 66%.
“Increases across a range of food items also pushed up inflation. These were partially offset by motor fuels, where average petrol prices fell on the month, while the price for diesel rose taking the disparity in price between the two fuels to the highest on record.”