Economy & Trade
UK inflation falls as Burnham sets out cost-of-living measures
Britain's annual inflation rate fell more than expected in June, helped by lower fuel prices, giving new Prime Minister Andy Burnham an early boost as he promoted measures aimed at easing living costs.
The Office for National Statistics said the Consumer Prices Index rose by 2.6 percent in the 12 months to June, down from 2.8 percent in May. Analysts had expected inflation to slow to 2.7 percent.
The fall was largely linked to lower petrol and diesel prices after crude prices dropped following a ceasefire between the United States and Iran. Analysts said the dip may not last, because fresh fighting in the Middle East this month caused a preliminary peace deal to collapse and pushed oil prices higher.
Burnham, who became prime minister on Monday, said in Bath that reducing cost-of-living pressure was the public's priority. He said he was reviewing earlier government commitments and reprioritising them.
In his first days in office, Burnham announced a tax cut on household electricity prices and a £2, or $2.70, cap on single bus fares. The government said value-added tax would be removed from electricity bills from October, a policy expected to cost the Labour government about £850 million in the current UK financial year.
New finance minister John Healey said falling inflation was welcome for families but that more was needed. He said the government had chosen to focus on living costs in its first week and would put working people at the centre of its work.
The October start date for the electricity measure coincides with an expected rise in the UK energy regulator's price cap on electricity and gas bills. The source said this was a consequence of the ongoing US-Iran war and was likely to add to inflation.
Paul Dales, chief UK economist at Capital Economics, said higher inflation was still coming. He said the delayed effect of high energy prices would probably lift inflation above 3.0 percent in September and to about 3.5 percent early next year. Analysts also said higher inflation could increase the risk of UK interest-rate rises.
Burnham has said he also wants to ease pressure on small businesses, which were hit by tax increases under the previous Labour administration. At the same time, he has pledged to keep the strict fiscal discipline used by his predecessor Keir Starmer, under which the government balances tax receipts with day-to-day state spending.
Burnham said the three policies he had announced that week — ending rough sleeping, capping bus fares and removing VAT from electricity bills — were fully funded.
Official data on Tuesday showed UK government borrowing fell more than expected in June, giving an early boost to Healey, who replaced Rachel Reeves as chancellor of the exchequer.
Matthew Ryan, head of market strategy at Ebury, said the general trend in the data was encouraging, but that the latest flare-up in US-Iran tensions and the rise in oil prices meant it was unlikely to last, regardless of the Burnham administration's cost-of-living measures.
Burnham's longer-term goal is to reindustrialise Britain and build municipal housing on a large scale.
Update
Burnham said his first-week policies on rough sleeping, bus fares and VAT on electricity bills were fully funded.
The government plans to remove VAT from household electricity bills from October at an estimated cost of about £850 million in the current UK financial year.
A £2 cap on single bus fares was announced on Wednesday.
Analysts warned the inflation fall may be short-lived because renewed US-Iran fighting has pushed oil prices higher.
Official data showed UK government borrowing fell more than expected in June.
Matthew Ryan of Ebury said the latest US-Iran tensions and oil-price rise mean the improving trend is unlikely to last.
Source note: AFP news report published on 22 July 2026 at 16:34:13 UTC.
Update
The report frames the inflation fall as an early boost for new Prime Minister Andy Burnham's cost-of-living push.
Fuel prices eased after crude prices fell following a ceasefire between the United States and Iran, according to the report.
Analysts expect the inflation dip to be short-lived after renewed Middle East fighting and a collapse of a preliminary peace deal pushed oil prices back up.
Burnham announced a tax cut on household electricity prices and a £2 cap on single bus fares in his first days in office.
Finance minister John Healey said falling inflation was welcome for families but there was more to do.
VAT is to be removed from electricity bills from October at a cost of about £850 million in the current UK financial year, according to the report.
Paul Dales of Capital Economics said inflation could rise above 3.0 percent in September and to about 3.5 percent early next year.
Analysts said higher inflation risks increases to UK interest rates.
Burnham has said he wants to ease pressure on small businesses and maintain strict fiscal discipline.
Official data showed UK government borrowing dropped more than expected in June.
Matthew Ryan of Ebury said the recent improvement was unlikely to last because of renewed US-Iran tensions and higher oil prices.
Burnham's long-term goals include reindustrialisation and large-scale municipal housing construction, according to the report.
Source note: AFP news report published on 22 July 2026 at 09:31:44 UTC.
Update
Prime Minister Andy Burnham took office on Monday and has pledged to ease cost-of-living pressures.
Burnham announced an energy tax cut on his first full day in office.
Finance minister John Healey said falling inflation was welcome but that more work was needed to give families financial room.
Keir Starmer resigned as prime minister and Labour leader last month after internal pressure following scandals, economic missteps and policy reversals.
Paul Dales of Capital Economics said inflation was still expected to rise above 3.0 percent in September and to about 3.5 percent early next year.
Analysts expect the June dip to be short-lived because renewed fighting in the Middle East pushed oil prices back up after a preliminary peace deal collapsed.
Source note: AFP news report published on 22 July 2026 at 06:46:44 UTC.
Update
The Consumer Prices Index rose 2.6 percent in the 12 months to June.
The May annual inflation rate was 2.8 percent.
The Office for National Statistics released the data in a statement.
Analysts had expected inflation to slow to 2.7 percent.
Lower fuel prices drove the larger-than-expected fall.
The fall was described as a boost to new Prime Minister Andy Burnham.
Source note: AFP news report published on 22 July 2026 at 06:14:28 UTC.
Uncertainty notes
Analysts said the inflation decline may be temporary because of energy-price pressures.
Future inflation and interest-rate effects are forecasts, not confirmed outcomes.
Source
AFP news report published on .