Inflation jumps to 3.0 per cent on Labour’s watch - Conservatives

Official figures published by the Office for National Statistics (ONS) this morning show the rate of inflation stood at 3.0 per cent in January 2025 – up from 2.5 per cent in December 2024, a jump of 0.5 per cent. 

A rise, above expectations, will be worrying news for families and demonstrates the latest economic failure at the hands of this Chancellor. The rate of inflation now sits a whole percentage point higher than the Bank of England's 2 per cent target.  

Inflation, or Consumer Price Index (CPI), is the measure of how much prices of goods and services are rising. Therefore, if the CPI rate is high, it means prices are rising quickly, adding pressure to family finances. 

In addition to these figures, official forecasts, from the Office for Budget Responsibility (OBR) and the Bank of England (BoE), warn that inflation is likely to be higher for longer because of Labour's Budget. 

Concerns over future price hikes loom as Labour's Jobs Tax hits in April. Large retailers are already warning price rises in the shops are inevitable – which risks pushing inflation up further. 

This morning's figures confirm:  

• The Consumer Prices Index (CPI) rose by 3.0 per cent in the 12 months to January 2025, up from 2.5 per cent in the 12 months to December 2024.

• The largest upward contribution to the monthly change in both CPIH and CPI annual rates came from transport, and food and non-alcoholic beverages; the largest downward contribution to both came from housing and household services.

• The rate of inflation in the UK is higher than both Germany and France. The rate of inflation in the UK is 3.0 per cent, compared to France's 1.8 per cent and Germany's 2.8 per cent.

• Inflation now sits above market and Bank of England expectations.

Mel Stride MP, Shadow Chancellor of the Exchequer, said: 

“Today's figures mean further pain for family finances – and it's thanks to the Labour Chancellor's record tax hikes and inflation busting pay rises. 

“Labour were warned that their tax spending and borrowing spree would drive up inflation. It means higher prices in the shops, and interest rates staying higher for longer, causing mortgage misery for millions.  

“This Chancellor is out of her depth, and we're all paying the price.” 

ENDS 

Notes to Editors 

• Inflation rose above expectation. The rate inflation stood at 3.0 per cent for January 2025, above expectation from Deutsch Bank of 2.9 per cent and above expectation of 2.8 per cent for Q1 of 2025 from the Bank of England (Money Week, Inflation, 18 February 2025, link).

Independent forecasters warned that Labour's Budget will result in inflation staying higher for longer: 

• The Bank of England increased its inflation forecasts in February. In November, the Bank of England predicted that inflation in 2024 would be 2.25 per cent, in 2025 would be 2.75 per cent and 2.25 per cent in 2026. In February 2025, the Bank of England increased its inflation predictions so that in 2024 inflation will be 2.5 per cent, 3.5 per cent in 2025 and 2.5 per cent in 2026 (Bank of England, Monetary Policy Report, page 6, 6 February 2025, link).

• The Bank of England said Labour's Budget has driven up inflation. ‘CPI inflation is also expected to rise in the near term due to regulated price changes and the impact of government policies announced in Autumn Budget 2024' (Bank of England, Monetary Policy Report, page 6, 6 February 2025, link).

• In October, the Office for Budget Responsibility (OBR) increased their annual forecast for inflation, in every single year of the forecast, when compared to the Conservatives' Budget. The OBR confirm inflation will be 2.5 per cent in 2024, 2.6 per cent in 2025, 2.3 per cent in 2026, 2.1 per cent in 2017, 2.1 per cent in 2028 and 2.0 per cent in 2029 – an upgrading in each year (OBR, Economic and fiscal outlook: October 2024, 30 October 2024, link).

• The OBR confirmed the decisions taken at Labour's budget will increase inflation. The OBR stated: ‘Having fallen from a 41-year high of 11.1 per cent in October 2022…We expect a temporary rise, from around 2 per cent in the third quarter of this year, to an average of 2.6 per cent in 2025. This is driven by higher gas and electricity prices, the direct effect of policies announced in this Budget' (OBR, Economic and fiscal outlook: October 2024, 30 October 2024, link).

Major retailers are warning of price rises following Labour's Jobs Tax: 

• Kate Nichols, CEO of UK Hospitality, said the National Insurance Jobs Tax is ‘forcing businesses to abandon investment, reduce headcounts and raise prices'. Kate Nicholls, CEO of UK Hospitality said: ‘[The Jobs Tax] is already forcing businesses to abandon investment, reduce headcounts and raise prices. It's completely misguided to be punishing a sector that has such growth potential' (The Sun, 21 January 2025, archived).

• The British Retail Consortium has warned that Labour's National Insurance Jobs Tax will force two thirds of retailers to increase their prices with food inflation potentially hitting 4.2 per cent. A survey by the British Retail Consortium of 52 Chief Financial Officers has revealed that 70 per cent of them are pessimistic or very pessimistic about trading conditions over the next 12 months. 67 per cent of them, or two thirds, said they would raise prices and over half said they would cut hours and overtime (BRC, Press Release, 15 January 2025, link).

• Alex Baldock, the Chief Executive of Curry's, said that price rises are ‘inevitable' due the ‘cost increases that have been chucked our way' following the budget. BALDOCK: ‘Well, we said that some price rises are inevitable and you can't entirely defy gravity with the scale and the speed of the cost increases that have been chucked our way. But we'll do our best to keep these to a minimum' (BBC Radio 4, 15 January 2025, archived).

• Simon Roberts, the Chief Executive of Sainsbury's has warned the employer National Insurance increase at the Budget could push food prices up. ‘I think given the speed these costs are coming at, they will be inflationary. We'll do everything we can to mitigate that impact but there will be inflationary impacts, because our costs are going up' (CITY A.M., 7 November 2024, link).

• The Federation of Small Business has said taken together with the Government's employment reforms the budget will impact jobs, wages and prices. ‘Larger small, and medium-sized businesses will struggle with the rises in employer national insurance on top of the large costs from the Government's employment law plans. We've been very clear in our warning of the difficulty SMEs will be confronted with in meeting all of these changes at once – and the potential impact on jobs, wages and prices' (Federation of Small Business, 30 October 2024, link).