Inflation and government borrowing highest for a year ahead of next week's Budget

Image source, Getty ImagesByTom EspinerBusiness reporterPublished21 October 2026, 07:08 BSTUpdated 1 hour agoUK inflation and government borrowing both hit their highest in a year on Wednesday, adding to the pressure on Chancellor John Healey ahead of his first Budget in a week.

The pace of UK price rises accelerated to 3.5% in the year to September, pushed up by sharp increases in petrol and diesel prices.

The inflation figures came as UK government borrowing jumped to nearly £25bn in September, which means borrowing for the financial year to date is running £6bn above official forecasts.

Healey has promised a Budget which will keep to Labour's commitment not to hike the three main taxes - income tax, National Insurance and VAT - while sticking to the party's fiscal rules.

Inflation, the rate at which prices are rising, jumped from 3.1% in the year to August to 3.5% in the year to September. It is the highest inflation has been since October 2025, according to the Office for National Statistics (ONS).

The cost of filling up a vehicle has soared in recent months as conflicts in the Middle East and Europe continue to squeeze global oil supplies.

The effective closure of the Strait of Hormuz by Iran after US and Israeli attacks has severely disrupted a major global supply line for crude oil, while oil refining capacity has been hampered globally by Russian and Ukrainian attacks on each other's infrastructure after Russia's invasion of Ukraine.

Petrol prices in September were the highest since August 2022, the ONS said, while diesel also rocketed.

The average price of petrol rose by 8.2p per litre to 169.5p per litre between August and September, while diesel rose to 192.5p per litre.

ONS chief economist Grant Fitzner said September's "notable" increase meant inflation was at its highest rate in almost a year.

As well as fuel prices, the increase was driven by rising prices for airfares, computer games and live events, Fitzner said.

September's inflation figure is also important because it suggests how benefits will increase next April.