UK energy discount ruling deals inflation blow

The Office for National Statistics has ruled out classifying a £400 discount from the UK government to help households with energy bills as a payment that lowers gas and electricity charges and hence inflation.

In a ruling on Wednesday that will come as a blow to the Treasury, the move will see UK inflation jump in October to close to 13 per cent, according to economists, and then move higher in January when retail energy prices are forecast to rise again.

The decision was expected by most officials because the rebate will be paid as a lump sum discount of the same amount to all households, but the classification choice was seen as a close call.

In recent days, more economists have been updating their inflation forecasts to reflect the 80 per cent increase in annual typical gas and electricity bills from £1,971 to £3,549 in October.

Had the ONS decided to treat the £400 payment as a discount, it would have taken about 2 percentage points off the consumer price inflation measure.