Prepare for a pricey Christmas as inflation ‘likely to rise’

Rishi Sunak has admitted that inflation is likely to continue to rise amid a cost of living crisis in the UK.

With fears of an expensive Christmas growing, the Chancellor said inflation hit 3.1% in September and is ‘likely to rise further’.

Independent forecaster the Office for Budget Responsibility (OBR) expects the rate to average 4% over the next year.

That could mean more hardship for families, particularly with the temporary Universal Credit uplift – worth more than £1,000 a year to claimants – being cut this month.

But the Government is promising ‘further support for working families’ and efforts to control inflation.

Mr Sunak blamed price rises on the global reopening of economies following the pandemic, and strained supply chains, which he promised further action on.

Experts have also pointed to the negative impact of Brexit on supply chains.

The Chancellor continued: ‘In the year to September, the global wholesale price of oil, coal and gas combined, has more than doubled. The pressures caused by supply chains and energy prices will take months to ease.

‘It would be irresponsible for anyone to pretend that we can solve this overnight. I am in regular communication with finance ministers around the world and it’s clear these are shared global problems, neither unique to the UK, nor possible for us to address on our own.’

The OBR now expects the economy to return to its pre-Covid level at the turn of the year, with growth this year revised up from 4% to 6.5%, followed by growth of 6% in 2022, and 2.1%, 1.3% and 1.6% over the next three years.

Mr Sunak added the Budget will offer ‘further support for working families’ and the Government’s fiscal policy will ‘keep in mind the need to control inflation’.

He said: ‘I have written to the Governor of the Bank of England today to reaffirm their remit to achieve low and stable inflation.’

Borrowing will be lower than previously forecast, falling from 7.9% of gross domestic product (GDP) – a measure of the size of the economy – to 3.3% next year, then 2.4%, 1.7%, 1.7% and 1.5% in the following years.

The better-than-expected public finances allowed Mr Sunak to make a series of major promises on public spending.

‘Today’s Budget increases total departmental spending over this Parliament by £150 billion,’ he said.

‘That’s the largest increase this century, with spending growing by 3.8% a year in real terms.’

It would mean a real-terms rise in spending in every single government department, he told MPs.

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