UK Prime Minister Liz Truss has pledged to increase state pensions in line with prices next year as Britain’s inflation rate rose to a 40-year high of 10.1 percent in September.
Speaking at Prime Minister’s Questions in the House of Commons on Wednesday, Truss sought to reassure pensioners that their incomes would not lag behind inflation – although other ministers have refused to provide such assurances in recent days.
“We were clear in our manifesto that we would keep the triple lock,” she said, referring to the mechanism by which pensions increase each year by the higher of inflation, earnings growth or 2.5 percent. “I’m committed to it. As does the chancellor.
Earlier in the day Jeremy Hunt, who Truss appointed chancellor on Friday, refused to confirm the government would keep its manifesto pledge to maintain the triple lock, as he responded to inflation figures released this morning.
Hunt is trying to find £40bn of savings to put the public finances on a sustainable footing after the failure of the government’s “mini” budget last month, which piled pressure on the Truss.
According to the consumer price index, the inflation rate rose from 9.9 percent in August to 10.1 percent in September, led by the highest increase in food prices in decades, beating economists’ expectations.
The government’s standard practice is to use September’s inflation figures to determine next April’s increase in pensions and benefits.
But the Trust has made no similar commitment to the level of benefits for non-pensioners.
George Dib, head of the Center for Economic Justice at the IPPR think tank, said that “the sharper rise in essential goods such as food and drink, where prices are now rising by more than 14 per cent. . . underlines the need for more support for the most vulnerable households this winter above the energy price cap’.
The details of the inflation data showed that there was an increase in the core index as well as higher food prices.
The key interest rate, excluding energy, food, alcohol and tobacco, rose from an annual rate of 6.3 percent in August to 6.5 percent in September.
The Office for National Statistics, which released the data, said the headline consumer price index rose 0.5% in September compared with August, a bigger increase in the month than in 2021, when the index rose rose only 0.3%.
At more than five times the Bank of England’s 2 percent target, double-digit inflation will also increase pressure on the central bank for a big interest rate hike on November 3.
The BoE will have to weigh the additional pressure on prices against the government’s reversal on unfunded tax cuts and less generous relief on household energy costs, which will reduce medium-term price pressures.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the “MPC is still a long way from being able to claim victory” over inflation, but urged the central bank to be more concerned about “the weakening of consumer demand and the emerging downturn on the labor market’. from the current high level of inflation.
Paul Dales, chief UK economist at Capital Economics, said the rate of inflation would rise to 10.5 percent in October and to 11 percent in April after the government’s energy price guarantee expires.
“Today’s announcement underscores the danger that core inflation will remain strong even as the economy weakens,” he said.
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