UK inflation hits 10.1% as millions worry for finances

1. The latest inflation figures show the cost of living went up 10.1% in the 12 months to September, driven mostly by rising food prices
2. It means prices are rising at their fastest rate for 40 years. The figure for August was 9.9%
3. September's inflation reading is important because it'll be used to help calculate April's rise in the state pension as well as increases in benefits
4. The prime minister tells MPs she and the chancellor remain "completely committed" to raising pensions in line with inflation
5. Liz Truss did not make the same commitment for benefits when asked by a Tory MP at PMQs if she could
6. BBC News is in Sunderland hearing how people are coping with the soaring cost of living and economic pressures
7. Our cost of living correspondent Kevin Peachey and personal finance analyst Myron Jobson have been answering your questions and offering advice
8. More than half of people expect their financial position to worsen in the next six months, according to a survey we've commissioned

Goodbye for now

Thanks for joining us for our cost of living coverage today.

Our reporters were Aoife Walsh, Alys Davies, Emily McGarvey, Jennifer Meierhans, Marita Moloney and Rachel Russell.

This page was edited by Alex Therrien, Chris Giles and Marie Jackson.

You can find more information and advice on our website here.

At-a-glance guide to the day's cost of living news

We're going to bring our live cost of living coverage to a close soon so here's a round up of what's been going on today.

• The headline figure was that UK inflation hit 10.1% in the 12 months to September, released by the Office for National Statistics
• It's big news because September's figure is normally used to calculate April's increase in the state pension and some benefits
• There have been mixed messages from government on whether they would stick to this what with it being so high, but PM Liz Truss said she was "completely committed" to doing it with pensions.
• But when a fellow Tory asked her during Prime Minister's Question whether benefits will also rise in line with inflation, she didn't make the same pledge
• While all of this was going on we've been broadcasting from Sunderland for the launch of Cost of Living: Tackling It Together and our correspondents and experts have been answering your questions
• It comes as a survey of more than 4,000 people carried out for the BBC suggested some 85% of them are now worried about the rising cost of living, up from 69% in a similar poll in January

Pension rise confusion shows chaos in government

BBC

We've been getting reaction to the prime minister's assurance that the state pension will go up by the same rate as inflation in April.

It came after Foreign Secretary James Cleverly said he could not give people "certainty" on it. His comments followed the prime minister's spokesperson saying Liz Truss was moving away from it.

Jim Pickard, chief political correspondent for the Financial Times, says this is the latest in "quite a few occasions" of mixed messaging from the government.

He says: "They leave this vaccuum where members of the government can say we're doing this unpopular or controversial thing and no one steps in and says 'well no actually we're not' so they get bad headlines for a day or two."

He adds: "They're not stamping down on it and saying ok, we have a firm direction and it's not this thing you've read in the newspaper' it just makes them look quite shambolic."

Observer columnist Sonia Sodha says: "It just shows how weak [Liz Truss's] authority is. It's a sign of a very chaotic administration if essentially stories are being put out there and the prime minister's official spokesperson doesn't really appear to know what the answer is."

She added: "Making this commitment on pensions is going to leave a lot less resource to do the same for vulnerable working age adults which is who the prime minister said she was worried about in PMQs today."

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As you'll know by now, the government has scrapped most of the key elements of its mini-budget after just over two weeks.

But why did it have to respond to the turmoil in the financial markets and why does this matter to mortgage payers and everyone else?

We've produced a simple guide - click here for an easy take on what is a very complicated story.

PM urged to explain benefits and social care policies

With question marks still hanging over the PM's plans for benefits and social care, the Tory benches are pleading for her to explain her policies.

Conservative MP Steve Double told a debate on the economy that the party needs to know "what the prime minister's policies are" after the fallout from the "rushed" mini-budget had led to a loss of confidence in her.

"Growth is a hard-won thing, you do not achieve growth simply by saying we're going to get growth as loudly and passionately as possible," he said.

"It needs to be nurtured with the right policies that actually instil confidence in the business community."

Meanwhile, Conservative MP William Wragg said he has submitted a letter of no confidence in Truss and told MPs he was "personally ashamed" by what occurred after the mini-budget. He said he could not tell his constituents that "they should support our great party".

Bank of England not fully briefed on mini-budget - deputy governor

Reuters

In further fall-out from last month's mini-budget, it's emerged that the Bank of England was not fully briefed by the government on it before it was unveiled.

The Bank's deputy governor Sir Jon Cunliffe told the chairman of the Treasury Committee, Mel Stride, this afternoon that the Bank would have advised the government if it knew there would be such a dramatic knock-on effect on market stability.

"We did not have a full briefing of the package the night before," he said.

"Had they asked us what the market reaction would be, we would have interacted with them.

"But it is not our responsibility to give the government advice on fiscal policy, it is the role of the Treasury."

UK economy 'resilient' but difficult decisions ahead - minister

PA Media

Treasury minister Andrew Griffith has warned Britain will face decline if action is not taken on the challenges facing government amid the cost of living crisis.

"For 14 years, people's living standards... have not been rising as quickly as they should," he told the Commons.

"We face challenges but we should address these from a place of optimism," he said.

"The fundamentals of the UK economy remain resilient with unemployment at its lowest level in nearly 50 years, and the UK forecast to have the fastest growth in the G7 in 2022."

Griffith acknowledged "difficult decisions will have to be made", but added "those decisions will never be made at the expense of the most vulnerable".

Shadow chancellor urges government to publish OBR forecasts

PA Media

Let's return to what's been going on in the House of Commons this afternoon while we've been answering your questions on the cost of living crisis.

During a debate on economic responsibility shadow chancellor, Rachel Reeves, said the new chancellor, Jeremy Hunt, has been "quick to put public services in his sights".

She said the Conservatives "are living on another planet" if they think that "after a decade of imposing austerity they can come back with season two, wildly swinging the axe on the country's already struggling public services".

Reeves called on the government to publish the Office for Budget Responsibility forecasts so MPs will "know the true state of our public finances and of our economy".

Treasury minister Andrew Griffith said the government was "focused on protecting the most vulnerable and looking after our economy".

How long will it take for mortgage rates to come down?

Myron Jobson

Senior personal finance analyst, Interactive Investor

Getty Images

Question: Sarah from Norwich asks: "How long is it realistically likely to take for Jeremy Hunt’s statement to stabilise the markets and hopefully bring down the mortgage rates? My mortgage is about to go up by 60% with the current rates."

Answer: How long is a piece of string? It is a question that doesn’t have an obvious answer, I’m afraid.

While financial markets have responded well to Chancellor Jeremy Hunt’s economic statement, those seeking to remortgage and those seeking a home loan shouldn’t hold their breath for an immediate reprieve in mortgage rates.

Average mortgage rates are at the highest level since the 2008 financial crisis, according to financial information company Moneyfacts.

Mortgage rates remain between one and two percentage points above pre-mini-budget levels.

While the turmoil in the money market which resulted in a rise in mortgage rates has subsided somewhat, lenders could still choose to play it safe and keep mortgages rates elevated.

Things could go from bad to worse if the Bank of England ups its base rates as expected.

What is the point of the energy price cap cut?

Kevin Peachey

Cost of living correspondent

Question: Judie Everett asks: "The severe curtailment of the energy price cap from two years to six months is both devastating and frightening for many, many people.

"Was the purpose of this cut purely to massage the figures in the OBR report to improve the government's financial position and forecast on 31 October?"

Answer: That is clearly a question for the government, and specifically the chancellor, to answer.

The cost of the original two-year Energy Price Guarantee was huge – possibly as much as £150bn which is much higher than the bill for furlough.

What households will want to know is what will replace the guarantee when it expires after six months.

At the moment a typical annual domestic bill is £2,500, having been limited by a cap on the cost of each unit of energy. Forecasts suggest that could climb to £4,347 in April, but the government has promised protection for those most in need.

Will my savings be better off if I wait for interest rates to improve?

Myron Jobson

Senior personal finance analyst, Interactive Investor

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Question: Tony Fenlon from Ayrshire, in Scotland, asks: "I have a fixed rate cash ISA which matures on 26 October, five days before the financial update and seven days before the Bank of England meets to review interest rates. Should I take what’s on offer just now, or put the money in a 30-day-notice ISA ahead of potentially better interest rates being available in early December?"

Answer: Good question, Tony. The answer is not simple.

The mood music among economists is the only way is up for interest rates as the Bank of England seeks to rein in inflation which returned to a 40-year high last month.

But higher interest rates do not always translate to higher savings rates. It could take months for the increase in interest rates to trickle through to savers – if at all.

The acceleration in the frequency of rate rises has meant that some savings providers may still be catching up to past base rate rises.

Put simply, you may get a better savings rate in the near future – but there are no guarantees. The amount you are looking to save could guide your decision.

An uptick in savings rates could mean the difference between pennies and hundreds of pounds depending on how much you have to save.

What help is available to pensioners?

Myron Jobson

Senior personal finance analyst, Interactive Investor

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Question: John Q asks: "As a pensioner, am I going to get any help with the cost of living increase, other than the energy price cap?"

Answer: As the cost of living crisis escalates, it is indeed important to understand what help is available.

You could get £150 off your electricity bill this winter under the Warm Home Discount Scheme, if you get the Guarantee Credit element of Pension Credit.

It's usually added as credit to your electricity bill. If you were born on or before 25 September, 1956, you could also be entitled to the Winter Fuel Payment - an annual one-off payment of between £250 and £600 to help you pay your heating bills.

The amount you’d receive includes a Pensioner Cost of Living Payment of between £150 and £300 for this winter only.

You may have also received the first half of the £650 Cost of Living Payment. The second payment is due to be made in November.

Vulnerable pensioners may also be able to claim help through the Household Support Fund as well as hardship funds run by energy companies.

What is the jobs market likely to look like in the next few years?

Kevin Peachey

Cost of living correspondent

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Question: Hardip Barad, who is studying for a PhD in pharmaceutical science, asks: "I’m finishing my studies soon so what is the UK jobs market likely to look like in the next few years?"

Answer: You are not the only person wanting to know, Hardip, but the truth is that it is a difficult question to answer.

There are various factors at play. At present, employers are in need of workers in a variety of different sectors. With more power in the hands of employees, some are taking action to secure better pay deals as the cost of living goes up.

But businesses are also wary of economic uncertainty and high borrowing costs which can curtail their investment and creation of new jobs.

Why does the Bank of England raise interest rates?

Myron Jobson

Senior personal finance analyst, Interactive Investor

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Question: Michelle Lacey asks: "I would like to know why the Bank of England believes the way to reduce inflation is by raising interest rates, when the reason inflation is so high is because of fuel prices - essential spending and something neither consumers or producers can do anything about?"

Answer: You make a fair point, Michelle. Higher interest rates make it more expensive for people to borrow money, which in turn would encourage people to save their cash instead of spending it.

If people spend less on goods and services overall, then the prices of those things would fall or rise more slowly at the very least. That’s the theory.

But many economists believe that upping the interest rate is an increasingly blunt tool to tackle the current bout of high inflation, which returned to a 40-year high last month.

This is because the main factors fuelling inflation are beyond the Bank of England’s sphere of influence, ranging from the fallout of the war in Ukraine to China’s zero Covid policy.

This is why the government has intervened to support households with a host of cost-of-living support measures, with upping interest rates a key part of a more complex economic strategy to cool red-hot inflation.

Would a windfall tax bring down my energy bills further?

Kevin Peachey

Cost of living correspondent

Question: Sandra Stephenson from Grindon, in Sunderland, asks: "Would a windfall tax bring down my energy bills further than the interventions already announced by the government?"

Answer: A windfall tax is very much back on the agenda, having previously been ruled out by Prime Minister Liz Truss.

In the Commons, the Chancellor Jeremy Hunt said he was "not against the principle" of taxing profits that are "genuine windfalls", adding that "nothing is off the table".

In itself, a windfall tax will not affect what you pay. But clearly the government is considering whether such a tax would help to fund further support for those in need, when the government support package comes to its earlier than expected end in April.

Will the government help with childcare costs?

Myron Jobson

Senior personal finance analyst, Interactive Investor

Getty Images

Question: Marjorie Stoddart, retired teacher and grandparent, asks: "Childcare is a big cost for parents of young children so what are the government’s plans to fund childcare in England?"

Answer: Tell me about it! As a father of a four-year-old myself, I’m acutely aware of the escalating cost of childcare.

There hasn’t been any major new announcement to help relating to childcare costs, with the government seemingly focussing on devising a credible economic growth strategy.

However, HMRC has recently been active in promoting it’s tax-free childcare offering financial support of up to £500 every three months (up to £2,000 a year) to help with the costs of childcare. Families could also use the sum to help pay for October half-term holiday clubs and wraparound care during the school terms.

It is a great money saver for eligible parents, but the uptake of the scheme continues to fall far below original estimates. So, it’s well worth finding out more.

Why can't the government give public sector workers a decent pay rise?

Kevin Peachey

Cost of living correspondent

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Question: Carol Best asks: "How can the government consider removing the triple lock on pensions, not give public sector workers a decent pay increase but settle on a 15% pay rise for barristers to stop them striking?"

Answer: Political events are moving fast. After days of uncertainty, the prime minister has confirmed that the triple lock will be honoured.

That means the state pension will rise in line with inflation in April. That will see the “new” state pension currently worth £185.15 a week go up to £203.85.

The basic state pension, for those who reached state pension age before April 2016, is currently £141.85 a week, and will go up to £156.20. That can be topped up for those on low incomes with Pension Credit.

While that issue may be settled, pay disputes are definitely not. Some have led to strike action.

How long will petrol prices stay high?

Myron Jobson

Senior personal finance analyst, Interactive Investor

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Question: Naomi Naylor from Durham, a third year paramedic student at the University of Sunderland, asks: "Petrol is my biggest cost and I would like to know... how long are the prices expected to remain so high?"

Answer: Fuel prices have actually fallen in recent weeks. The RAC said the average price of a litre of fuel in the UK fell by nearly 7p in September.

There is a sentiment that pump prices could be cheaper if more retailers would pass on the savings they’re currently getting every time they buy new stock.

Prices remain high compared to yesteryear, and there are signs that suggest higher prices could remain – but only time will tell.

There are a number of factors influencing the price of petrol. A lot has been said about the increase in pump prices due to the economic sanctions against Russia from the fallout of its invasion of Ukraine.

Oil prices have also been influenced by the fall in the value of the pound in the wake of the infamous mini-budget last month while the controversial decision by the Opec oil cartel to cut oil production could push up fuel prices.

How much more can we reduce our energy consumption?

Kevin Peachey

Cost of living correspondent

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Question: Jack, in Yorkshire, asks: "How much more can we reduce our energy consumption? If we turn everything off, we still have to pay the standing charge."

Answer: Jack is correct that part of our domestic energy bill is the standing charge which is designed to fund getting gas and electricity to people’s homes.

Lots of people have found ways to cut energy use. Community groups across the UK are helping with initiatives such as warm banks.

In a survey of 4,000 people for the BBC, nine in 10 of those asked had delayed putting on the heating to save money.

That is not an option for everyone, and many people feel they have already done as much as they can and are relying on more support from anywhere they can get it.

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Will mortgage rates come down in five years?

Myron Jobson

Senior personal finance analyst, Interactive Investor

Question: Cristina Pana from Grindon, Sunderland says: "We managed to fix our mortgage but the deal ends in five years' time. What might rates look like then? Will they get back to levels we’ve been used to?"

Answer: While nobody short of a functioning crystal ball can accurately predict what mortgage rates will be in five years’ time, the price of existing fixed rate deals offers some clues as to what lenders think.

The average two-year fixed rate mortgage is pricier than the average five-year fixed rate deal, which suggests lenders believe interest rates will settle.

A lot will depend on how successfully inflation can be brought under control. Upping interest rates has historically been a key tool to this end.

The fact remains that we seem to be at the end of the golden age for ultra-cheap mortgages, and with further interest rate rises seemingly around the corner, homeownership is set to become more costly for many of those on the property ladder and those reaching for the first rung – at least over the short term.

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