Michelle ThompsonUK inflation surged to 3% in January from 2.5% in December, marking the fastest increase in 10 months. The rise was driven by higher food prices, airfare, and private school fees.
Essential groceries, including meat, eggs, butter, and cereals, became more expensive, with overall food costs rising by 3.3% compared to last year. Olive oil and lamb saw significant price hikes of 17% and 16%, respectively.
Households face further cost increases with energy bills set to rise in April, along with water and council tax hikes. The government acknowledged challenges in reducing inflation, while political parties debated the impact of tax policies.
To support incomes, the minimum wage, benefits, and state pensions will increase from April. However, businesses warn that rising wages and National Insurance costs may lead to higher prices for consumers.
“Life is a constant challenge.”
Gaby Rowley, pictured with her son Mason, says rising food costs worry her at night.
“Life is a constant struggle,” said Gaby Cowley, a young mother who told the BBC she is barely managing financially as food prices soar.
“Food costs have nearly doubled in three years,” she said. “We now spend at least £90 a month, plus £20-£30 weekly on essentials like fruit, vegetables, and milk.”
When expenses exceed income, Ms. Cowley sells her baby’s old clothes to make extra money. While she hopes the minimum wage increase will boost her pay, she believes financial difficulties will persist.
Beyond food, inflation was also driven by airfare, which saw a smaller-than-usual drop in January. Private school fees rose by 13% after VAT was applied from 1 January, following the removal of a tax exemption.
The unexpected jump in inflation, surpassing forecasts of 2.8%, has raised questions about the Bank of England’s next steps regarding interest rates.
Inflation peaked at 11.1% in October 2022, prompting interest rate hikes that increased borrowing costs. As inflation slowed, the Bank cut rates earlier this month to 4.5%. However, with inflation still above the 2% target, economists debate whether rate cuts will continue or slow down.
Professor Jonathan Haskel, former Bank of England policymaker, told the BBC that the inflation spike could either be ignored or signal further challenges ahead.
ONS chief economist Grant Fitzner noted the VAT-related increase in private school fees was a one-time event. However, Sarah Coles of Hargreaves Lansdown warned that rising wage costs for supermarkets and producers could keep food prices high.
“This comes alongside hikes in water bills and council tax—making ‘Awful April’ a harsh reality,” she said.
Exchequer Secretary James Murray acknowledged that bringing inflation down to the 2% target would be challenging.
“We’re in a different economic landscape than a few years ago when inflation was consistently in double digits,” he said.
He added that the Bank of England had anticipated a slight rise in inflation early this year but expressed confidence in the government’s economic reforms to drive growth nationwide.
However, Shadow Chancellor Mel Stride blamed Labour’s tax increases and wage policies for the inflation spike in January.
Liberal Democrat Leader Ed Davey criticized the chancellor’s approach, warning of a potential stagflation crisis, with stagnant economic growth and rising costs for households.
Ruth Gregory, Deputy Chief UK Economist at Capital Economics, described the inflation increase as a concern for the Bank of England but doubted it would halt further rate cuts.
“The risk is that inflation remains stubbornly high, leading to slower or smaller rate reductions,” she said.
