Inflation Set To Enter The Stratosphere' And Top 18%

Fears of second successive year of benefits cuts for poorest

- Ben Chapman Rob Merrick

Inflation is set to surge to 18.6 per cent next year - the highest level in almost half a century - as average energy bills hit £5,816, leaving millions of people in "dire straits" according to alarming new forecasts from one of the world's biggest banks that suggest the UK's energy crisis will stretch on for years.

Experts said that current policies to tackle the crisis risked being a "sticking plaster" and a Tory MP warned that people would be left homeless this winter without more help to pay for skyrocketing bills.

Kevin Hollinrake said that Conservative Party leadership contender Liz Truss's promises to cut taxes would provide only an extra "pound a week" to the poorest households, while at the same time giving about £30 a week to those like his. "It is simply not right," said Mr Hollinrake, who is backing Rishi Sunak, Ms Truss's rival, to be the next prime minister.

And anti-poverty campaigners have raised the alarm of Britain's poorest people being forced to endure a second successive year of benefits cuts. With prices predicted to be growing at their fastest rate in almost half a century by January, benefits are only set to rise by around 11 per cent from April, leaving a shortfall of almost 8 per cent.

Analysts at investment bank Citi have predicted that another surge in gas prices last week will push the rate of inflation in January to its highest since 1976. Based on the latest market prices for gas, Citi now expects energy regulator Ofgem's price cap to hit £4,567 in January and then £5,816 in April, compared with the current level of £1,971 a year. That would lead to inflation "entering the stratosphere" and peaking higher than even after the oil crisis of 1979, the bank said in a note.