UK Inflation Hits 3.4%: Tories Criticize Government's Economic Mismanagement

Tories blame inflation rise on 'economic mismanagement' We've just heard from shadow chancellor Mel Stride, who blames the rising inflation rate on the government's "economic mismanagement". In a statement, Stride accuses the government of making the "wrong choices" and says "their Budget is unravelling day by day" and "punishing the most vulnerable". "A record-high tax burden and irresponsible borrowing are stifling growth and fuelling inflation – leaving working people worse off," Stride adds. Easing rent prices keep lid on inflation Dearbail Jordan Senior business and economics reporter The rise in inflation rate for the year to December - from 3.2% to 3.4% - could have been worse. There are some areas where the pace of price rises eased. These include rent, which increased at a slower clip in December than other months. The ONS includes rent prices in a category it calls "housing and household services" and in this latest set of data, inflation eased to 4.9% in the year to December. That compares to 5.1% for the 12 months to November. Tobacco tax rises in Budget contributed to December inflation rate climbing As we reported earlier, an increase in tobacco prices is one of the factors behind the higher-than-expected increase in inflation. The ONS report points to the fact that tobacco duty increased in the Budget at the end of November, whereas in 2024 it increased in October. "This timing difference may help explain why prices fell by 0.1% in November 2025, compared with a rise of 3.3% a year before," the report says. "And then subsequently rose by 3.0% in December 2025, compared with a rise of 0.7% a year before." 'More to do,' says Reeves, after inflation rate climbs to 3.4% We have just heard from Chancellor Rachel Reeves, after this morning's inflation rate increase. In a statement, Reeves says: “My number one focus is to cut the cost of living. "At the budget I announced £150 off energy bills, a freeze to rail fares for the first time in 30 years, a freeze to prescription charges for the second year running, and an increase to the national minimum and living wage. "Money off bills and into the pockets of working people is my choice. There’s more to do, but this is the year that Britain turns a corner.” We'll bring you more political reaction as we get it. Airfares, tobacco and bread drive rising prices There are a number of factors behind the higher-than-expected rise in inflation in December including - as you might expect - Christmas. Grant Fitzner, chief economist at the Office for National Statistics, which released the data, says tobacco prices rose following recently-introduced excise duty increases. He adds: "Airfares also contributed to the increase with prices rising more than a year ago, likely because of the timing of return flights over the Christmas and New Year period. "Rising food costs, particularly for bread and cereal, were also an upward driver." Inflation rise more than expected Dearbail Jordan Senior business and economics reporter The rise in the inflation rate - to 3.4% in the year to December - was higher than expected. Analysts had forecast a slight tick up to 3.3%. We'll delve down into the data and let you know what this means for your money. Keep an eye on airfares Jemma Crew Business reporter Lindsay James, investment strategist at Quilter, says the rise in flight prices before Christmas will be a factor if today’s inflation figures show an uptick, as expected. “The point at which they measure them is likely to be a little bit later in December, when of course we all know they are very expensive just before Christmas,” she tells BBC Radio 4’s Today Programme. But she says the longer term story is that inflation is coming down, and is expected to be between 2 and 2.5% by the end of 2026. “So we'll be looking deeper into this data today to see if we can still see that continuing,” she adds. Minimum wage increase has ‘ripple effect’ on prices, London business says Adam Woods Senior business and economics reporter Jenny Holloway is the chief executive of Fashion Enter, a garment manufacturer in London. Jenny says that increases in the minimum wage have put a squeeze on her business. When the minimum wage goes up, there is a “ripple effect” whereby the wages of senior staff must go up in turn, she says. Some of those costs are then passed on to the consumer. Electricity is another consideration, she says, and the factory is keeping its power usage as tight as possible in an effort to keep bills down. “It's constantly making sure that we're turning the lights off regularly. We've got all LED lighting now, for example. We're on timers so the lights will go off,” Jenny says. There are also some unexpected upsides to higher costs. While material costs have gone up by around 20%, the prices are higher for imported fabrics than for local ones. “We’re finding Leicester far more competitive, and so from a perspective of carbon emissions and sustainability we’d rather go local.” What’s been happening with inflation? Dearbail Jordan Senior business and economics reporter It’s a mixed picture. The last set of figures the ONS released showed that the Consumer Price Index (CPI) measure of inflation slowed to 3.2% in the year to November, down from 3.6% in the 12 months to October. That is far below the frankly terrifying levels we saw in 2022 after Russia launched its full-scale invasion of Ukraine and oil prices soared, sending the inflation rate to a 40-year high of 11.1%. But just because inflation has eased, it doesn’t mean prices are falling - they’re still going up, just at a slower pace. Latest UK inflation rate set to be released The latest report on inflation, which tells whether prices are rising more slowly or more quickly across the UK, are set to be released in the next hour. Economists from Pantheon Macroeconomics expect the rate of inflation to rise slightly, to 3.3% in the year to December, up from 3.2% in the year to November due in part to an increase in tobacco duties. The Office for National Statistics will publish the latest figures at 07:00 GMT, and we will bring you updates as well as analysis from our experts, including what it means for you.