Burnham admits Budget will be ‘challenging’ after inflation rises

Andy Burnham has admitted next month’s Budget will be “challenging” for his government after official figures revealed inflation has soared to a five-month-high.

Chancellor John Healey is set to deliver the first Budget since Mr Burnham entered No 10 next month, amid concerns over the impact of Donald Trump’s war on Iran and funding for UK defence.

The major political headache comes against a backdrop of rising inflation rates, with the most recent official figures showing another jump on Wednesday.

Mr Burnham told broadcasters that the current climate would mean next month’s Budget will be “challenging”, but insisted his government “will not take risks with people’s living standards”.

“It is going to be challenging, because the picture around the world is challenging, particularly the situation in the Middle East, and we will look carefully at all those things,” he said.

“We won’t take risks with people’s living standards or with the economy as a whole, so we will take it all into account.

“It’s why we wanted to do an earlier Budget, we didn’t want to leave a long period of speculation, I think that’s been shown now to be the right decision and it will mean taking whatever action we can to help people while also making sure we apply the highest degree of prudence to the running of the economy.”

He insisted that the economy is still showing “resilience across the board” as he linked to the inflation uptick to the war in the Middle East.

But the Resolution Foundation think tank has estimated that the government’s headroom has fallen to between £5bn and £10bn, which will need to be recouped with either with tax rises or spending cuts at the Budget.

The Office for National Statistics (ONS) revealed that inflation accelerated to a five-month-high of 3.1 per cent last month as higher fuel prices and airfares pushed up the cost-of-living for Britons.

It was in line with predictions from economists and points to an upward trajectory for inflation since striking a 15-month-low of 2.6 per cent in June.

It therefore moved further away from the Bank of England’s 2 per cent inflation target, ahead of the central bank’s latest interest rate decision on Thursday.

The official data comes amid warnings from economists that inflation will continue to swing higher over the coming months, with increases in interest rates also predicted.

Households are also expected to face another rise in their energy bills from next month, adding to pressure on consumer finances ahead of the autumn Budget.

Chancellor John Healey said: “The war in the Middle East is impacting on inflation worldwide, not just here at home, in our bills, our weekly shop and at the petrol pumps.

“We have taken early action to help give families and businesses breathing space, by cutting tax on electricity bills, capping bus fares at £2 and lowering rates for pubs, social clubs and live music venues.

“Despite this serious global uncertainty, our UK economy is proving resilient, and our determination to deliver growth in every postcode continues.”