Andy Burnham warns of 'difficult decisions' for 28 October budget as UK inflation rises to 3.1%

Official figures showed UK headline inflation rose from 2.9% in July to 3.1% in August, largely driven by higher fuel prices.

The Office for National Statistics said motor fuel prices rose 23%; average petrol increased by 9.1p between July and August to 161.3p per litre, and diesel by 14.2p to 181.8p per litre. Air fares rose 6.2% month-on-month, particularly long-haul, and higher crude and fuel costs pushed up factory output prices.

Prime Minister Andy Burnham said the 28 October budget will take investor concerns and the fiscal impact of the Middle East conflict into account and that the government will make “difficult decisions”, while not risking people’s living standards or the wider economy.

The Bank of England is preparing for an interest-rate decision on Thursday; the base rate is currently 3.75%, markets assign about a one-in-five chance of a 0.25 percentage point rise, and the City expects at least four increases to 4.75% next year.

Economists noted underlying inflation signs were steadier: services inflation remained at 3.4% and core inflation at 2.6%. Official data also showed slowing wage growth and rising unemployment.

Analysts linked the rise in UK inflation to the intensifying Middle East conflict and higher global oil prices — the crude price exceeded $106 a barrel. Quilter Cheviot’s head of fixed interest research Richard Carter said the figures are a setback for an administration focused on easing the cost of living and that rising borrowing costs will limit the budget measures available.