UK September Inflation Hits 3.5% Driving Benefit Increases

The Office for National Statistics reported that UK Consumer Prices Index inflation rose to 3.5% in September, exceeding the 3.4% consensus forecast from Pantheon Macroeconomics. The agency attributed the climb primarily to transport costs, noting that petrol and diesel prices reached four-year highs, with diesel surpassing £2 per litre for the first time.

Other contributing factors included a Middle East energy shock that increased household energy costs and the expiration of a temporary summer VAT cut on family attractions. These pressures are expected to persist into October as Ofgem implements an increase in the energy price cap.

The Department for Work and Pensions used the 3.5% figure as the basis for inflationary increases to benefits next year. While the Chancellor will confirm final amounts in the upcoming Autumn Budget, most working-age benefits are linked to the CPI. Under the Universal Credit Act 2025, the Secretary of State must increase the Universal Credit standard allowance by at least the September CPI rate plus an additional amount, though some claimants may see increases based on a 3.9% average wage growth figure. State pensions are also expected to see higher increases due to the Triple Lock pledge.