Surprise inflation rate rise to 4% as Hunt insists government 'plan is working'

Forecasts had previously mapped out a fall to 3.8% down from 3.9% in November

Inflation rose slightly to 4% in the year to December, but the chancellor continues to insist the governments "plan is working."

Forecasts had previously mapped out a fall to 3.8% down from 3.9% in November.

But the latest figures from the Office for National Statistics (ONS) saw a spike in Consumer Price Index (CPI) inflation, marking the first rise since February 2023.

Chancellor Jeremy Hunt said that inflation “does not fall in a straight line” and that "we need to stay the course we have set out."

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He said: “As we have seen in the US, France and Germany, inflation does not fall in a straight line, but our plan is working and we should stick to it.

“We took difficult decisions to control borrowing and are now turning a corner, so we need to stay the course we have set out, including boosting growth with more competitive tax levels.”

The rise comes after tobacco duty increased last November, with alcohol also driving inflation higher, which offset further falls in food prices.

The chancellor defends the government's record on inflation despite the increase

Rachel Reeves, Labour’s Shadow Chancellor called "any rise in inflation is bad news for families who are worse off after fourteen years of economic failure.   

"Britain cannot afford another five years of economic failure. Only Labour can deliver the change Britain needs and make working people better off.”  

Grant Fitzner, ONS chief economist, said: “The rate of inflation ticked up a little in December, with rises in tobacco prices due to recently-introduced duty increases.

“These were partially offset by falling food inflation, where prices still rose but at a much lower rate than this time last year.”

This news will be a concern to the prime minister, who pledged to halve inflation by the end of 2023 as part of his five promises.

In October, the government appeared to have met its target early, as the rate of inflation fell to 4.6%, but the increase on Wednesday goes against the falling trend at the end of last year.

Another key promise from the prime minister is to "stop the boats", using the government's flagship Rwanda plan.

But than plan is in danger today as the prime minister faces a crunch vote on his Rwanda bill, after he saw the biggest Conservative rebellion of his leadership on Tuesday night.

Mr Hunt also told broadcasters that the inflation risk posed by the Red Sea crisis was one of the reasons for the UK-US military strikes against Houthi targets.

The attacks on shipping using the crucial sea route by the Houthi in Yemen has forced some firms to divert vessels around Africa rather than using the Suez Canal to travel between Europe and Asia, adding transport costs and time delays.

“It’s precisely because we are concerned about what’s happening in the Red Sea that the UK has taken action with the United States and our other allies to secure freedom of navigation. We are obviously watching the situation very carefully.

“But when you have a very volatile world that just shows the importance of having a plan to tackle inflation and sticking to that plan.”