INFLATION has hit three per cent, its highest rate for more than five years, driven up by increases in transport and food prices.

The Consumer Prices Index rose from 2.9 per cent in August to three per cent in September, a level it last reached in April 2012.

The UK Government's political opponents blamed the "Brexit squeeze," putting more pressure on family budgets because as the pound falls due to the uncertainties surrounding Britain's withdrawal from the EU, prices are rising.

The pick-up in inflation raises the likelihood of an increase in interest rates next month.

The latest figure is significant because state pension payments from April 2018 will rise in line with September's CPI.

Under the "triple lock" guarantee, the basic state pension rises by September's CPI rate, earnings growth or 2.5 per cent, whichever is the greatest.

Peter Dowd for Labour said: “Inflation has reached its highest level in five years, while real earnings are still lower than in 2010, following seven years of Tory economic failure.

“Only Labour will deliver a £10 per hour Real Living Wage, investment in infrastructure, and an effective industrial strategy to raise living standards and build an economy for the many, not the few.”

Kirsty Blackman for the SNP said the Tories’ “extreme” Brexit squeeze was hitting families and businesses across the country and rising inflation would put even more pressure on household budgets.

“The Chancellor must use the November Budget to deliver real help for hard-pressed families by scrapping the cap on public sector pay, tackling the wages crisis, and supporting those on benefits, to prevent even more low income families being driven into poverty, debt and destitution.

“As Brexit continues to drive up the cost of living and impact across the economy, the UK Government must commit to protecting our vital membership of the single market and customs union to avoid further devastation to jobs, incomes, and businesses,” added the party’s economy spokeswoman.

Sir Vince Cable, the Liberal Democrat leader, claimed the Brexit squeeze caused by the falling pound was getting worse and was hitting the poorest families hardest.

“This above-target inflation is increasing the cost of the weekly shop and cutting into people’s living standards.

“The Chancellor must end the benefits freeze that is set to leave millions of families hundreds of pounds poorer a year.

“Above all, the Government must change course from a destructive Brexit that would damage living standards and push up prices further,” he added.

Grahame Smith, General Secretary of the Scottish TUC, said: “The squeeze on workers’ wages is continuing and those suffering from the public sector pay cap are particularly badly hit. The increases in transport and food costs will hit workers particularly hard.

“Today’s figures will redouble workers’ determination to demand much more than the lifting of the public sector pay cap and to pursue above inflation increases to begin to redress the impact of years of real terms wage cuts,” he added.

Dave Prentis, Unison’s General Secretary, who will be speaking this evening at a TUC rally against the public sector pay cap, taking place at Westminster, said: “With the highest rate of inflation for five years the Government’s pay cap is cutting deep.

“There’s no light at the end of the tunnel for public service workers. Unfunded, below-inflation pay awards are apparently the best the government has to offer.

“All public servants have seen the value of their pay fall year on year. They need a decent pay rise that more than matches the rising cost of living.”

A spokesman for the Treasury said: "We understand that families are feeling the effects of inflation and we are helping them with their living costs. We've frozen fuel duty, doubled free childcare for nearly 400,000 working parents and cut income tax for 30 million people. Increases to the National Living Wage are also delivering the fastest pay rise for the lowest paid in 20 years."

Mike Prestwood, the Office for National Statistics head of inflation, explained: "Food prices and a range of transport costs helped push up inflation in September.

"These effects were partly offset by clothing prices that rose less strongly than this time last year.

"While oil and fuel costs continued to rise, overall the rates of inflation for raw materials and goods leaving factories were little changed in September."