18 Oct 2011

Inflation matches record high of 5.2 per cent

Inflation matched its record high last month. The consumer prices index (CPI) rose from 4.5 per cent to 5.2 per cent.

Inflation matches record high of 5.2 per cent (Getty)

CPI now equals the high reached in September 2008, according to the Office for National Statistics (ONS).

Increasing energy costs are being blamed for a large proportion of the rise in inflation.

The consumer prices index will be used to determine next April’s rise in state benefits.

The benefit rates are not formally unveiled until later this year, but this means the basic single state pension will increase by £5.31 to £107.46 a week, while the joint state pension will increase by £8.49 to £171.84.

Employment benefits, such as jobseeker’s allowance (JSA) and income support, are also calculated using the September CPI rate, meaning JSA will increase by £3.51 to £71.01 a week.

The higher-than-expected surge was driven by a jump in utility bills, as gas and electricity increased 13 per cent and 7.5 per cent respectively following price hikes from major energy providers, including Scottish & Southern Energy, E.ON, British Gas and Scottish Power.

Read more: Household incomes take biggest tumble in 30 years

Sir Mervyn King, governor of the Bank of England, which is tasked with keeping inflation down, is expected to mount a strong defence of the bank’s handling of the economic crisis in a keynote speech tonight.

The increase in state benefits will put more pressure on Chancellor George Osborne, who is battling to slash the nation’s budget deficit, as unemployment hit a 17-year high of 2.57 million in the three months to August.

‘Difficult time’

Asked for David Cameron’s response to the latest inflation figures, the PM’s spokesman said: “We understand it is a difficult time for households who are affected by these price rises, which reflect what is happening to global oil and gas prices.”

The spokesman was challenged at a daily media briefing in Westminster over whether the Bank of England was right to pursue a loose monetary policy by printing money at a time of high inflation.

The PM’s spokesman said: “On the question of quantitative easing, the decision to loosen monetary policy is a decision for the Bank of England, something that they make a judgment on based on their assessment of inflation and what is likely to happen to inflation in the future.”