United Kingdom

Truss promises to keep ‘triple lock’ as inflation hits 10.1%

UK prime minister Liz Truss committed to increasing state pensions in line with prices next year as Britain’s inflation rate rose to a 40-year high of 10.1 per cent in September.

Speaking during prime minister’s questions in the House of Commons on Wednesday, Truss sought to reassure pensioners their incomes would not fall behind inflation — even though other ministers have declined to provide such a guarantee in recent days.

“We were clear in our manifesto that we will maintain the triple lock,” she said, referring to the mechanism through which pensions are increased each year by whatever is highest of inflation, earnings growth or 2.5 per cent. “I am committed to it. So is the chancellor.”

Earlier in the day Jeremy Hunt, whom Truss appointed as chancellor on Friday, declined to confirm the government would honour its manifesto promise to keep the triple lock as he responded to inflation figures released in the morning.

Hunt is trying to find £40bn of savings to put public finances on a sustainable footing following the failure of the government’s “mini” Budget last month, which has piled pressure on Truss.

According to the consumer price index, the rate of inflation rose from 9.9 per cent in August to 10.1 per cent in September, driven by the highest food price increases in decades, exceeding economists’ expectations.

The government’s standard practice is to use the September inflation figure to determine the increase in pensions and benefits the following April.

But Truss did not make any similar commitment to the level of non-pensioner benefits.

George Dibb, head of the Centre for Economic Justice at the IPPR think-tank, said the “steeper rise in essentials such as food and drink where prices are now rising at over 14 per cent . . . underlines the need for greater support for the most vulnerable households this winter over and above the energy price cap”.

The details of the inflation figures showed there was an increase in the core index as well as higher food prices.

The core rate, excluding energy, food, alcohol and tobacco, rose from an annual rate of 6.3 per cent in August to 6.5 per cent in September.

Column chart of Annual change in price (%) showing Transport inflation, including petrol is coming down, while food inflation is rising sharply

The Office for National Statistics, which released the figures, said the overall consumer price index rose 0.5 per cent in September compared with August, a larger increase over the month than in 2021 when the index rose only 0.3 per cent.

At more than five times the Bank of England’s 2 per cent target, the double-digit inflation rate will also add to pressure on the central bank for a large interest rate rise on November 3.

The BoE will need to weigh the additional price pressures against the government’s U-turns on unfunded tax cuts and less generous relief on household energy costs, which will reduce medium-term pressures on prices.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the “MPC still is a long way from being able to claim victory” over inflation, but urged the central bank to worry more about “weakening consumer demand and emerging slack in the labour market” than the current high level of inflation.

Paul Dales, chief UK economist at Capital Economics, said the rate of inflation would rise to 10.5 per cent in October and to 11 per cent in April once the government’s energy price guarantee expired.

“Today’s release highlights the danger that underlying inflation remains strong even as the economy weakens,” he said.

File source

Show More

Related Articles

Back to top button