What is the current rate of inflation and what does it mean for you?

The UK inflation rate returned to 10.1 per cent in the 12 months to September, according to the Office for National Statistics (ONS) – after easing slightly to 9.9 per cent in August – keeping it at the highest level for 40 years on as the cost of living crisis continues to bite.

The situation is likely to get worse before it gets better, with the Bank of England (BoE) forecasting inflation to hit 13% in the final quarter of this year, well north of the government’s target of 2%.

The current rise means prices of everyday items such as basic food, fuel, clothes, shoes and furniture have risen over the past year, a development that threatens to hit low-income families harder at a time when they can’t afford it.

Rising costs, staff shortages and supply chain disruption are known to affect both big retail brands and small businesses, leaving them with little choice, as they see it, but to pass on price increases to consumers to secure their own their survival.

“After last month’s small fall, headline inflation has returned to the high seen earlier in the summer,” said the ONS’s director of economic statistics, Darren Morgan.

“The rise was driven by further increases in food, which posted its biggest annual rise in more than 40 years, while hotel prices also rose after falling this time last year.

“These increases were partially offset by continued declines in the cost of gasoline, with airline fares falling more than usual for this time of year and used car prices also rising less sharply than the big increases seen last year .

“While still at a historically high pace, costs facing businesses are starting to rise more slowly, with crude oil prices actually falling in September.”

Cost of living: How to get help

The cost of living crisis has touched every corner of the UK, pushing families to the brink with rising food and fuel prices.

  • The independent asked experts to explain small ways you can stretch your money, including managing debt and getting things for free.
  • If you need to access a food bank, find your council’s website using gov.uk, then use your local authority’s website to locate your nearest centre. The Trussell Trust, which runs several food banks, has a similar tool.
  • Citizens Advice provides free help to people in need. The organization can help you find grants or benefits, or give you advice on rent, debt and budgeting.
  • If you are feeling distressed and isolated or struggling to cope, the Samaritans offer support. you can speak to someone free of charge over the phone, confidentially, on 116 123 (UK and ROI), email [email protected] or visit the Samaritans website to find details of your nearest branch.

Responding to the figures, new chancellor Jeremy Hunt said the government would “prioritise help for the most vulnerable while delivering wider economic stability”.

But his Labor counterpart, Rachel Reeves, said the figures would put more stress on families.

“It is clear that the damage has been done. This is a Tory crisis, made in Downing Street and paid for by working people,” he said.

“Mortgage costs are soaring, borrowing costs are rising, living standards are falling and we are forecast to have the lowest growth in the G7 over the next two years.”

ONS figures published on October 11 showed Britons seeing their average total pay rise by 6 per cent and their regular pay by 5.4 per cent between June and August – the highest since the start of the coronavirus pandemic – but wages still fail to keep up with runaway inflation.

The figures show that average weekly earnings for total pay in August 2022 were £617 and standard earnings were £574. Private sector workers saw their wages rise 6.2 percent before inflation, nearly three times faster than their public sector counterparts, who received a 2.2 percent increase, but the increases were eclipsed by rising costs for natural gas, electricity, fuel, food and other goods;

The data puts Rishi Sunak’s government on course for further clashes with civil servants, including nurses, doctors, lawyers and teachers who have seen the value of their incomes collapse this year, adding to the pain of a decade of falling real wages.

It comes after Ofgem’s freezing of the energy price cap, the maximum a utility can charge an average customer per year, at £2,500 over two years will have provided some relief to households, who were facing another an 80 percent increase in their bills since October 1 in response to soaring global gas prices.

If the planned cap increase had been allowed to go ahead, it would have risen from £1,971 to £3,549 for an average household, with pre-paid meters charged even more.

However, Mr Hunt has since reduced that support to just six months, taking us to April when a new strategy will be reviewed and imposed.

A shopper holds his basket at a supermarket as food inflation hits record high

(PA)

British consumers are facing flat wages and higher costs for everything from food, clothes, petrol, heating, housing and rent at a time when rising interest rates mean borrowing costs are also rising, most recently up 0.5pc units to 2.25 percent. as the BoE’s Monetary Policy Committee moved to try to put a brake on inflation.

While the current outlook does indeed look bleak, consumers are encouraged to view the present adversity, which will eventually pass, as an opportunity to reassess their personal circumstances, streamline their finances and cut any necessary regular expenses.

“The most important thing savers can do now is review how this environment will affect their finances, where they hold their savings and make adjustments as needed,” said Colin Dyer, client director at Abrdn Financial Planning.

“For example, keeping significant amounts of cash in a savings account is essentially losing money in an inflationary environment, so depending on your attitude to risk, investing in stocks and shares ISAs can offer a greater return if invested for the long term.”

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