Inflation rises to highest level this year in fresh blow to John Healey ahead of Budget

Britons have been dealt a fresh cost-of-living blow as inflation surged to its highest level in almost a year.

The latest figures will pile further pressure on Chancellor John Healey ahead of his first Autumn Budget, as households face another squeeze on their finances.

The Consumer Prices Index (CPI) rose to 3.5 per cent in September, up from 3.1 per cent in August, according to the Office for National Statistics (ONS).

This marked the highest inflation rate since October 2025, when it stood at 3.6 per cent, and exceeded economists' expectations of 3.4 per cent.

Rising transport costs were the biggest driver of the increase, with average petrol and diesel prices reaching their highest levels in four years.

Responding to the new figures, Chancellor John Healey said: "We know that price rises from conflicts in the Middle East and Europe are hitting Britain and countries worldwide.”

But he said the Government’s decision on Wednesday to begin drilling in the Jackdaw gas field in the North Sea was investment “in our clean energy future and supporting British workers”.

"In my Budget next week, I will keep up this momentum,"he said.

"Maintaining our fiscal discipline and drive for growth in every postcode, while giving businesses and families some breathing space."

Shadow Chancellor of the Exchequer, Andrew Griffith MP, said: "Government borrowing of more than £3 trillion – the highest in history – and rising inflation show Labour has lost control of the economy. Next week’s Budget needs to take urgent action to tackle the deficit, reduce the red tape and net zero costs that are driving up the cost of living for families.

"The Conservatives will always be honest about the state of our nation’s finances. We will cut welfare and wasteful spending so we can cut taxes and make our country prosperous again."

ONS chief economist Grant Fitzner said: "Inflation climbed notably in September to its highest annual rate in almost a year.

"Increased fuel prices were again the main driver, with the cost of diesel the highest since July 2022."

Higher airfares, computer game prices and live event costs also contributed to the increase, although slower price rises for hotel stays helped offset some of the pressure.

Mr Fitzner added that rising crude oil and petrol prices had also pushed up costs for manufacturers, adding to concerns about wider inflationary pressures across the economy.

Suren Thiru, chief economist at the Institute of Chartered Accountants in England and Wales (ICAEW), warned that inflation was "tightening its grip on the UK economy" as rising fuel prices placed further pressure on households and businesses.

He warned that inflation could climb to 3.8 per cent in October before approaching 4.5 per cent in January, driven by further increases in energy bills.

Mr Thiru said: "Rising inflation is turning the Budget into a perilous high-wire act for the Chancellor," with higher borrowing costs squeezing the Government's financial headroom.

He added: "With inflation increasing, the pieces are falling firmly into place for a November rate rise."

The economist also urged the Chancellor to deliver a "credible, fiscally disciplined Budget" to avoid fuelling further price rises.

Craig Rickman, personal finance expert at interactive investor, warned that the latest inflation figures could put pressure on the Bank of England to raise interest rates in November.

He said: "September’s higher than expected inflation rise to 3.5% continues an unwelcome upward trend, and will put pressure on the Bank of England to hike interest rates when it meets again in November."

Professor Joe Nellis, head of economic research at accountancy firm MHA, warned that Britain could face a prolonged period of stubborn inflation and weak economic growth as energy costs continue to rise.

He said September's inflation increase to 3.5 per cent was a "harsh reminder that the UK's inflation problem is still hanging over the economy", despite recent improvements in employment and consumer confidence.

He warned that inflation could climb above four per cent during the winter, with businesses facing higher energy, transport and employment costs that could be passed on to consumers.

Professor Nellis said the Bank of England's Monetary Policy Committee was "almost certain to raise interest rates" at its next meeting on November 5, potentially adding further pressure to household finances.

However, the economist questioned whether the Bank's focus on controlling inflation was appropriate when much of the pressure was being driven by global energy prices.

He said: "With growth remaining subdued and investment, dynamism, and innovation desperately needed in the economy, a rise in interest rates will only undermine efforts to change this."

Professor Nellis suggested the Government should reconsider the Bank of England's mandate to give greater weight to economic growth and employment when setting interest rates.

Turning to the Autumn Budget, he warned that higher inflation and borrowing costs would further restrict the Chancellor's spending options.

He added: "The Autumn Budget must confront an economy struggling to generate sustainable growth while households continue to face a squeeze on living standards."