- UK inflation rises to 3.5 per cent, highest in almost a year
- Fuel prices the biggest driver of the increase
- Public debt passes £3 trillion for the first time
- Analysts expect Bank of England rate rise in November
UK INFLATION and government borrowing rose more than expected in September, official figures showed on Wednesday, piling pressure on the government a week before its budget.
The Consumer Prices Index rose to 3.5 per cent in September from 3.1 per cent in August, its highest level in almost a year, the Office for National Statistics (ONS) said. Analysts had forecast 3.4 per cent.
Transport costs, particularly motor fuel, made the largest contribution to the rise, the ONS said. Diesel prices at UK pumps recently hit their highest level since July 2022, shortly after Russia’s invasion of Ukraine.
Chancellor John Healey, who will deliver the first budget of Andy Burnham’s government on October 28, said: “We know that price rises from conflicts in the Middle East and Europe are hitting Britain and countries worldwide.”
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He said his budget would focus on “maintaining fiscal discipline ... while giving businesses and families some breathing space”.
Debt tops £3 trillion
Separate figures showed government borrowing reached £24.5 billion in September, above forecasts of about £24 billion.
“Spending, including higher debt interest costs, increased more than government income, partly reflecting the impacts of inflation,” the ONS said.
UK public debt is provisionally estimated to have passed £3 trillion for the first time at the end of September, although debt as a share of GDP fell by 0.7 percentage points to 94 per cent.
Richard Carter, head of fixed interest research at Quilter Cheviot, said the government wanted to pursue “an ambitious long-term spending programme while borrowing costs and existing debt are already placing significant demands on the public finances”.
What it means for borrowers
Government bond yields worldwide have climbed to multi-decade highs as inflation rises, prompting central banks to raise interest rates and increasing costs for businesses and households with loans and mortgages.
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Following Wednesday’s figures, more analysts are predicting that the Bank of England will raise interest rates at its next meeting in November.
“The key question from here is whether higher rates can contain inflation without putting further pressure on an economy that is already navigating a difficult growth backdrop,” said Richard Flax, chief investment officer at Moneyfarm.
(With inputs from agencies)
