Inflation rises to 41-year high of 11.1% piling misery on millions of struggling families

16 November 2022, 07:11 | Updated: 16 November 2022, 10:10

The Chancellor warned of "tough but necessary decisions" ahead
The Chancellor warned of "tough but necessary decisions" ahead. Picture: Alamy

By Asher McShane

The Chancellor has blamed Covid-19 and the war in Ukraine and warned of 'tough' financial decisions ahead as inflation hit a 41-year high of 11.1%.

The ONS said the rise, the biggest in four decades, was because of rising energy bills and the increasing cost of food. It heaps pressure on families already struggling in the cost of living squeeze.

The rise puts pressure on the Bank of England to order another a big rise in interest rates next month to rein prices in. The knock-on effect would be that it would raise mortgage costs for homeowners and risk an even deeper recession.

Follow all the developments on the government's financial plans and listen to the Autumn Budget live on LBC on Thursday on Global Player

Chancellor Jeremy Hunt warned that getting inflation under control would require "tough but necessary decisions on tax and spending to help balance the books"

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Mr Hunt blamed Covid-19 and the war in Ukraine. "The aftershock of Covid and Putin's invasion of Ukraine is driving up inflation in the UK and around the world," he said.

"This insidious tax is eating into pay cheques, household budgets and savings, while thwarting any chance of long-term economic growth.

"It is our duty to help the Bank of England in their mission to return inflation to target by acting responsibly with the nation's finances. That requires some tough but necessary decisions on tax and spending to help balance the books.

"We cannot have long-term, sustainable growth with high inflation. Tomorrow I will set out a plan to get debt falling, deliver stability, and drive down inflation while protecting the most vulnerable."

Grant Fitzner, chief economist at the Office for National Statistics (ONS), said: "Rising gas and electricity prices drove headline inflation to its highest level for over 40 years, despite the Energy Price Guarantee.

"Over the past year, gas prices have climbed nearly 130% while electricity has risen by around 66%.

"Increases across a range of food items also pushed up inflation.

"These were partially offset by motor fuels, where average petrol prices fell on the month, while the price for diesel rose taking the disparity in price between the two fuels to the highest on record.

"There was further evidence that costs facing businesses are rising more slowly, driven by crude oil and petroleum prices."

The ONS estimated that without the government’s help on energy bills in the form of the Energy Price Guarantee, the inflation figure would have gone as high as 13.8%.

Food and non-alcoholic drinks also saw a big increase, with costs up 16.4% in the year to October.

Shadow chancellor Rachel Reeves said: "Inflation rising yet again will strike more fear in the heart of families across Britain dealing with soaring food prices, rising energy bills and a Tory mortgage premium on their home.

"British people feel the impact of rising inflation so much more than other countries because 12 years of Tory economic failure has left us exposed to any shocks.

"The potent mix of high inflation and low growth is trapping us in a vicious cycle of stagnation."

Jonathan Moyes Head of Investment Research, at investment firm Wealth Club, said: “Consumers should brace themselves for a grim winter of austerity, tax rises and further interest rate rises.”

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