[Benjamin]

The UK is forecast to see the highest rate of inflation of the G7 advanced economies this year, according to an influential global policy group.

The Organization for Economic Co-operation and Development (OECD) raised its prediction for UK inflation - the rate at which prices rise - to 3.5% across 2025, citing higher food costs as a factor.

It increased its forecast slightly for UK growth this year to 1.4%, but the economy is still expected to slow next year.

The report comes as Chancellor Rachel Reeves is preparing November's Budget in which she is expected to put up taxes or cut spending in order to stick to her own rules on government borrowing.

The OECD's UK inflation forecast for 2025 is higher than its previous estimate of 3.1%, and while the rate is expected to fall to 2.7% in 2026, that would still be the second highest in the G7.

Growth in the UK is predicted to slow to 1% next year, unchanged from the OECD's previous forecast in June.

It said this slowdown would be caused by a "tighter fiscal stance" - indicating either higher taxes or lower government spending - as well as increased trade costs and uncertainty.

Responding to the OECD's forecast, Reeves said the figures "confirm that the British economy is stronger than forecast - it has been the fastest growing of any G7 economy in the first half of the year".

"But I know there is more to do to build an economy that works for working people – and rewards working people."
Shadow chancellor Sir Mel Stride said the OECD confirmed "what hard-working families already feel - under Labour, Britain is in a high tax, high inflation, low growth doom loop".

"The UK is now teetering on the edge of stagflation, all driven by Labour's economic mismanagement."

Speculation about tax rises has been growing ahead of the Budget, with some analysts suggesting the chancellor will need to raise £20bn-£30bn in order to meet her self-imposed borrowing rules, which she has said are "non-negotiable".

On Tuesday, the Resolution Foundation think tank recommended cutting 2p from the employee National Insurance rate while adding the same amount to income tax, a move it says would raise £6bn.

However, Labour has promised not to raise taxes such as income tax, VAT or national insurance on "working people".

The latest monthly UK inflation figures showed the rate stood at 3.8% in August, driven by rising food prices, and in its latest forecast the OECD said the UK was one of several countries seeing higher food costs.

However, many UK companies have complained about increased costs from the rise in employers' National Insurance Contributions and a higher minimum wage.

Analysts say these higher costs have been passed on to consumers, which has pushed up inflation.

The current rate is well above the Bank of England's target of 2%, and the Bank has predicted it will hit 4% before falling back.

Last week, the Bank kept interest rates unchanged and warned the UK was not "out of the woods yet" when it came to inflation.

https://www.bbc.co.uk/news/articles/cx2n4877j7lo

[bots]

3.5% inflation isn't actually bad if its backed up with say an average of 5% pay rises. The issue is growth. We need the country to be able to spend more on pay rises so people have more money in their pocket. The solution is not to increase taxes and cut services