As inflation skyrockets, chancellor Rishi Sunak has issued a warning that the coming months “will be tough”.
Sunak told businesses that the government was “ready to do more” to help households feeling the squeeze amid rising energy, fuel and food prices, and would cut tax for firms to enable them to invest.
Inflation in the 12 months to April 2022 stands at nine per cent, the highest levels seen since 1982 and a two per cent rise on the year to March.
It also means that the UK has the highest rate of inflation within the G7, with price rises in Germany and France standing at 7.4 per cent and 4.8 per cent, respectively.
The energy price cap being raised in April has led to a sharp rise in energy bills and has helped drive up inflation, the Office for National Statistics [ONS] says. UK households are now paying £1,971 on average for the typical level of gas and electricity used, while fuel prices have hit new highs of £1.68 [unleaded] and £1.81 [diesel] per litre, tightening the squeeze on individuals and their finances.
Sunak told firms in attendance at the annual Confederation of British Industry [CBI] dinner that no government could intervene to make the cost-of-living crisis “disappear overnight”, as he explained that a “perfect storm of global supply shocks” including the aftermath of the pandemic, lockdown in China and the war in Ukraine were responsible for rising prices.
Sunak said that he “cannot pretend” that shielding families from rising costs will be an easy task and warned that “the next few months will be tough” but reassured that “where we [the government] can act, we will.”
Calling on businesses to increase investment and training and stimulate the economy, he continued: “Our firm plan is to reduce and reform your taxes to support you to do all three of those things. That is the path to higher productivity, higher living standards, and a more prosperous and secure future.”
Elsewhere, the Bank of England fears that excessive price rises could take the UK close to an economic recession, with inflation projected to peak at more than 10 per cent in 2022 with energy bills set to increase again in October.
The economy has already contracted in March after consumers reined in spending due to rising prices. Two successive quarters of negative trajectory would see the country enter a technical recession.
The Bank has responded by increasing interest rates on four consecutive occasions since December to curb inflation, but its governor Andrew Bailey said that its influence was limited since prices were being driven up by global forces.
With poorer households beginning to struggle since more of their incomes are being put toward energy prices, the government is facing growing pressure to intervene.
Image taken from Wikimedia Commons
