Rising inflation underlines scale of Andy Burnham’s cost of living challenge
Summary
Inflation in the UK rose to 2.9% in July, mainly due to higher energy bills as Ofgem raised its price cap. This increase highlights the challenge for Prime Minister Andy Burnham and Chancellor John Healey to help people handle rising living costs this autumn amid continuing economic pressures.Key Facts
- UK inflation rose from 2.6% in June to 2.9% in July, mostly because energy prices went up.
- The Ofgem price cap for household energy bills increased, and another rise is expected in October.
- A recent drop in fuel prices, linked to eased tensions in the Middle East, was temporary; fuel prices are rising again.
- Burnham’s government cut VAT on electricity bills to ease costs but other price increases may outweigh this help.
- Food prices increased by only 1.3% in July but may rise due to summer heat and drought affecting supply chains.
- Core inflation, which excludes fuel and food, stayed at 2.6%, indicating no strong wage-driven inflation yet.
- Wage growth is slowing, so people may feel the full impact of inflation without stronger pay increases.
- The government faces higher borrowing costs due to rising bond yields, which could increase public spending on interest payments.
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