Inflation pressures pause but cost of living crunch will bite this winter

Commenting on the latest inflation figures for September, which saw CPI fall slightly to 3.1 per cent (down from 3.2 per cent in August but up from 0.4 per cent in February) and CPIH fell to 2.9 per cent (from 3.0 per cent in August), but with further increases due over the coming months, Jack Leslie, Senior Economist at the Resolution Foundation, said:

“Today’s inflation data tells us both about the cost of living pressures today, and the pressures coming down the line as it is normally used to uprate benefits and set income tax rises next April.

“Inflation fell back this month temporarily as the effects of last year’s Eat Out to Help Out artificially raised last month’s inflation outturn. But it is set to rise further in future months as producer prices have risen by 6.7 per cent over the past year.

“Price pressures in Britain are global in nature, with the rising cost of household bills and fuel driven by a surge in global demand as the economy reopens.

“The big questions for policy makers now are just how temporary these price pressures will be, and whether they’ll translate into stronger pay growth. Britain’s recent history suggests that high inflation feeds through into real wage falls instead – a lesson families can ill-afford to learn for a third time in a decade.

“Today’s inflation figure of 3.1 per cent means that a typical worker will see their income tax rise by £78 next year, in addition to a rise in National Insurance contributions, as the personal tax allowance is frozen. And while an expected 3.1 per cent rise in benefits will feel generous after a decade of benefit caps and freezes, that will be of cold comfort to over four million working-age households who have seen their Universal Credit support cut by £20 a week.”