Inflation and borrowing hit year-high ahead of UK Budget
UK inflation reached 3.5% in September and government borrowing neared £25bn, increasing pressure on Chancellor John Healey.
Stock photo for illustration only, not from the actual event
- UK inflation rose to 3.5% in the year to September, reaching its highest level since October 2025.
- Government borrowing in September jumped to nearly £25bn, exceeding OBR forecasts by £6bn.
- Soaring petrol and diesel costs were driven by ongoing conflicts in the Middle East and Europe.
- Chancellor John Healey faces mounting pressure ahead of his upcoming Budget announcement on October 28.
UK inflation and government borrowing both surged to their highest levels in a year on Wednesday, intensifying pressure on Chancellor John Healey ahead of his very first Budget announcement in a week.
The Office for National Statistics (ONS) reported that the rate of price increases accelerated to 3.5% in the twelve months leading up to September, climbing from 3.1% in August. This uptick was largely propelled by sharp increases in petrol and diesel prices.
Stock photo for illustration only, not from the actual event
The cost of filling up motor vehicles has spiked over recent months as ongoing conflicts in the Middle East and Europe continue to restrict global oil supplies. Iran's effective closure of the Strait of Hormuz following US and Israeli strikes severely disrupted a vital crude oil transit route, while oil refining capacity worldwide has suffered due to mutual infrastructure attacks between Russia and Ukraine.
September petrol prices reached their highest point since August 2022, according to the ONS, alongside surging diesel costs. The average price of petrol jumped by 8.2p per litre to 169.5p, while diesel climbed to 192.5p per litre, pushing overall motor fuel prices up by 29.8% during the period. Additional upward pressure on the inflation figures came from rising airfares, computer games, and live event ticket prices.
The sharp rise in inflation and public borrowing creates a severe fiscal balancing act for the Treasury. Beyond immediate economic management, September's inflation figures dictate statutory increases for welfare payments and state pensions under the triple lock mechanism, which is expected to rise by 3.9% next April. This leaves the Chancellor with very narrow fiscal headroom as he attempts to honour manifesto pledges while managing soaring national debt costs.
Accompanying the inflation data, the ONS revealed that the government borrowed £24.5bn in September—£1.8bn higher than the same month last year—as mounting inflation drove up debt interest expenditures. Consequently, cumulative borrowing for the fiscal year has run £6bn above projections set by the Office for Budget Responsibility (OBR). Although overall national debt surpassed £3tn for the first time, the debt-to-GDP ratio used for fiscal rules actually declined.
"We know that price rises from conflicts in the Middle East and Europe are hitting Britain and countries worldwide."
John Healey, Chancellor of the Exchequer
The Conservative opposition responded by claiming the figures proved that Labour had lost control of the economy. Shadow Chancellor Andrew Griffith urged Healey to use the Budget to tackle the deficit and trim regulatory costs. Meanwhile, political analysts anticipate a cautious fiscal package on October 28 designed to avoid major net economic disruption while deferring tougher tax choices.
Source: BBC Politics
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