UK inflation highest in nearly a year, services inflation also higher
Turning back to UK inflation, which accelerated to an annual rate of 3.5% last month from 3.1% in August, the highest rate since last October.
Services price inflation, closely watched by the Bank of England as a guide to underlying price pressures, rose to 3.7% from 3.4%, also higher than expected.
Transport prices were up 6.6% in the 12 months to September, compared with 4.6% the previous month, according to the Office for National Statistics.
The average price of petrol rose by 8.2 pence a litre between August and September, to 169.5p, the highest since August 2022.
Diesel prices rose by 10.7, taking the average price to 192.5p – the highest price recorded since July 2022.
Overall motor fuel prices leapt 29.8% in the 12 months to September, up from 23% in August.
Within transport, there were smaller upward effects from air fares and sea fares, and partially offsetting small downward effects from roadside recovery, and second-hand cars, the ONS said.
Carla Denyer, MP for Bristol and the former co-leader of the Green Party of England and Wales, said:
Industry groups in north-east Scotland have said the decision on the Jackdaw gas field is “hugely welcome”, but the pending decision on the Rosebank oil field is “every bit as vital”.
The Scottish government has called for the Treasury’s income from oil and gas to be placed in a “future generations fund”.
The approval came after months of speculation about the Jackdaw offshore development, which is in the North Sea 150 miles to the east of Aberdeen.
Groups representing the offshore industry had urged the UK government to approve the new development, stressing the economic and energy security benefits. However, environmental groups are dismayed by the move.
Russell Borthwick, chief executive of Aberdeen + Grampian Chamber of Commerce, said:
The Scottish government’s energy minister Stephen Gethins said the economic benefits of the Jackdaw field must be felt in Scotland.
He said:
Angela Hepworth, chief executive of Scottish Renewables, said global events have brought the need for domestic energy into “sharper focus”.
The approval of Jackdaw is an “important step” for the North Sea, according to Shell.
The UK energy giant jointly owns Jackdaw operator Adura, which is headquartered in Aberdeen, together with Norway’s Equinor.
Tony Nunan, Shell’s UK chief of staff, said:
Adura CEO: Jackdaw 'equivalent to Norwegian gas in terms of environmental performance'
UK oil and gas giant Shell and Norway’s Equinor have been lobbying hard for the green light for Jackdaw. Adura, a North Sea 50-50 joint venture between Shell and Equinor, commissioned a report this week that said rejecting the two projects would cost the UK economy nearly £10.8bn over the next decade.
The Jackdaw gas field in the North Sea is “equivalent to Norwegian gas in terms of environmental performance”, Adura chief executive Neil McCulloch claimed this morning.
Speaking on BBC Radio 4’s Today programme, McCulloch was asked about the UK producing “more pollution in British gas fields than they do in Norwegian gas fields” – with campaigners claiming four times as much.
Asked about the example of emergency gas flaring, which Norway has banned, and whether he could “clean up your act”, McCulloch replied:
Here’s a handy explainer from our energy correspondent Jillian Ambrose about what the decision means exactly.
About four years and six energy secretaries after it was given the green light, the Jackdaw gasfield has been given consent to begin production 150 miles east of Aberdeen.
So what does this long-awaited decision mean for the Labour party, household bills, the economy and the climate crisis?
Lale Akoner, market strategist at the etoro trading platform, said about the UK’s green light for the North Sea gasfield:
UK borrowing hits £24.5bn in September as John Healey prepares for budget
The Treasury ran a higher than expected budget deficit of £24.5bn last month as rising inflation pushed up the interest paid on government debt, increasing pressure on John Healey before his first budget next Wednesday.
Official figures out this morning show the government paid £10.9bn in debt interest: the highest September figure since records began, and only the eighth time the monthly number has been above £10bn.
Some government bonds are directly linked to the retail prices index measure of inflation, with payments rising in line with it. RPI has increased in recent months as the Iran war has pushed up energy costs. The Office for National Statistics said this had added £4bn to debt interest costs in September alone.
Total government debt is estimated to have hit £3tn for the first time – although as a share of the size of the economy it has fallen to 94%, from 95% a year ago.
The £24.5bn monthly deficit on the public finances was up from £17bn in August, and £1.9bn higher than the independent Office for Budget Responsibility had forecast.
In the financial year so far, public sector net borrowing is £97.8bn, the ONS said – £4.4bn lower than last year but still £6bn higher than the OBR expected.
The data underlines the impact of the Iran war on the public finances, before next Wednesday’s budget.
Healey has been keen to stress his determination to stay within the fiscal rules set out by his predecessor as chancellor, Rachel Reeves.
However, he is widely expected to accept a slimmer financial buffer, or “headroom”, against those rules than the £24bn Reeves had built up at the time of her spring forecast.
Green party leader calls Jackdaw approval 'climate vandalism'
Green Party leader Zack Polanski described the Jackdaw gasfield approval as “climate vandalism” and a “victory for Shell over the people”.
UK chancellor: Energy wealth fund to 'spark new wave of clean power'
The chancellor of the Exchequer, John Healey, focused on the new energy wealth fund – which looks similar to Norway’s fund but is too little, too late, according to critics – in his remarks.
The pro-growth campaign group Britain Remade welcomed the decision.
Sam Richards, its chief executive, said:
The environmental law charity ClientEarth is dismayed by the UK’s decision to approve the controversial Jackdaw North Sea gasfield. It said it has twice been successful in legal action against the UK government’s climate plan in recent years.
Introduction: UK inflation jumps to 3.5% on rising motor fuels cost; UK approves Jackdaw gas field
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
UK inflation has accelerated more than expected to 3.5% as the cost of motor fuels surged at the fastest rate in four years, with diesel topping £2 a litre this month.
The Office for National Statistics said annual inflation, measured by the consumer prices index (CPI), rose from 3.1% in August. Economists had forecast a rise in the consumer prices index to 3.4%.
The ONS said the biggest factor pushing up inflation was transport, in particular motor fuels; while restaurants and hotels made the largest, partially offsetting, downward contribution.
The motor fuel inflation rate was the highest since August 2022.
Core CPI (excluding volatile energy, food, alcohol, and tobacco costs) rose by 2.8% in the 12 months to September, up from 2.6% in August.
Oil and gas prices have soared since the end of February when the US and Israel launched their war on Iran. The practical closure of the strait of Hormuz to most fossil fuel traffic since then has sent the price of Brent crude well north of $100 a barrel.
Petrol prices have climbed above £1.70, while the cost of a litre of diesel has also risen, hitting a record high of more than £2 a litre this month.
Bank of England officials are widely forecast to raise interest rates when they meet next month, with concerns that inflation will jump above 4% next year – more than double the central bank’s 2% target rate.
The UK government has approved the controversial Jackdaw gasfield in the North Sea, a widely expected move that will nonetheless dismay environmental campaigners and a number of Labour MPs.
Miatta Fahnbulleh, the energy secretary, said the project will start supplying gas to homes and businesses from the end of this month.
At the same time, she said a new energy wealth fund will be set up by the government with a £2bn downpayment to reinvest oil and gas revenues into the climate transition, away from fossil fuels.
She said:
While Labour’s 2024 election manifesto committed to a ban on new drilling licences in the North Sea, the companies behind Jackdaw and the Rosebank oilfield project, which is being decided on separately, have sought environmental approval for existing licences.
The companies resubmitted their applications for environmental approval earlier this year. The decision on Jackdaw had been expected last month but was delayed, seemingly to take it beyond the Holborn and St Pancras byelection on 8 October, where Labour was defending a seat against a Green challenge and ultimately won.
Andy Burnham, the prime minister, said the decision will “protect hundreds of jobs and help keep millions of homes warm this winter”.
The Agenda
2pm BST: Bank of England governor Andrew Bailey speech
5pm BST: European Central Bank president Christine Lagarde speech
