UK Prime Minister Andy Burnham has acknowledged that the upcoming budget will be “difficult” for his government after official data showed inflation rising to a five-month high. Chancellor John Healey is set to present the first budget since Andy Burnham took office, amid concerns over the impact of the US war against Iran and the need to fund UK defense.
According to the UK Office for National Statistics (ONS), inflation accelerated to 3.1% last month—a five-month high—driven by rising fuel and airfare prices. The figure met economists’ forecasts and continued an upward trend following a 15-month low of 2.6% recorded in June. Inflation has moved further away from the Bank of England‘s 2% target ahead of its next interest rate decision.
Economic challenges and budget planning
Andy Burnham stated that the current global situation means the budget will be “difficult”, but assured that his government “will not gamble with people’s living standards” or the economy as a whole. He said the government would take the international situation, including events in the Middle East, into account when preparing the budget.
Andy Burnham also noted that the decision to hold the budget early was the right one, as it avoided leaving the country in a state of uncertainty for an extended period. He promised to take all possible measures to support the public while ensuring the “highest degree of prudence” in managing the economy.
The Prime Minister emphasized that the British economy is still showing “resilience across the board”, while linking the rise in inflation to the war in the Middle East.
The Resolution Foundation think tank estimates that the government’s fiscal headroom has shrunk to £5–10 billion. The government will have to offset this amount through either tax increases or spending cuts during budget preparations.
Economists also warn that inflation may continue to rise in the coming months, potentially leading to higher interest rates. Furthermore, households may face another increase in energy bills next month, adding pressure to their finances ahead of the autumn budget.
Chancellor John Healey stated that the war in the Middle East is affecting inflation globally, including household bills, food prices, and fuel costs. He noted that the government has already taken steps to support the public and businesses, including reducing taxes on electricity bills, capping bus fares at £2, and lowering rates for pubs, social clubs, and live music venues.
Source: The Independent UK
