Rishi Sunak: what Chancellor said about soaring 9% inflation amid calls to act on cost of living squeeze
Consumer Prices Index inflation increased to 9% in the year to April, the highest level in more than 40 years
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Rishi Sunak is facing mounting pressure to act as the rate of inflation shot up to its highest level in 40 years.
It marks the fastest measured rate since records began in 1989, and the ONS estimates it is the highest since 1982.
Business groups, charities and opposition politicians are now calling on the Chancellor to cut taxes or increase state support for firms and households that are struggling to cope with the soaring cost of food and energy.
What has Rishi Sunak said?
He said: “Countries around the world are dealing with rising inflation
“Today’s inflation numbers are driven by the energy price cap rise in April, which in turn is driven by higher global energy prices.
“We cannot protect people completely from these global challenges but are providing significant support where we can, and stand ready to take further action.
“We’re saving the average worker £330 a year through reducing National Insurance Contributions, changing Universal Credit to save over a million families around £1,000 a year, and providing millions of families with £350 each this year to help with their energy bills.”
The Chancellor has already pledged around £22 billion in support, including £9 billion to deal with household energy bills and measures to mitigate the impact of April’s rise in National Insurance Contributions (NICs).
But he is now facing calls for more immediate action, rather than waiting for the autumn budget, with inflation set to increase further this year.
The Bank of England forecast earlier this month that inflation is likely to peak at £10.25% later this year, with food prices set to rise even higher due to crucial supplies of products like wheat being held up because of the war in Ukraine.
The Bank has a mandate to keep inflation below 2%, but Governor Andrew Bailey has admitted to being helpless in the face of global pressures including a spike in energy costs and the conflict in Ukraine.
What support measures could be made?
Reports have suggested that measures including increasing the warm home discount by up to £600 to cope with rising energy bills are under consideration.
Mr Sunak is also reported to be plotting a 1p cut in income tax from April 2023, a year earlier than planned, according to the I newspaper.
Meanwhile, The Times suggested that the package to help with energy bills could be unveiled in July, followed by tax cuts in the autumn.
The Confederation of British Industry said it was “critical” for the government to examine ways to help people facing real hardship and support vulnerable firms.
The British Chambers of Commerce called for Mr Sunak to reverse the rise in NICs and give businesses a VAT discount on their energy bills, while opposition parties and some Tory MPs want to impose a windfall tax on oil and gas companies which have seen bumper profits as a result of high global prices. The money raised would be used to ease the pressure on households.
However, ministers have so far resisted the calls to impose a windfall tax, with Foreign Secretary Liz Truss saying that such a move would make it difficult to attract future investment in the UK.
She said: “There is a cost in imposing a tax like that. My view is lower taxes are the best way to attract more investment, to get the businesses into this country that can create these high paid jobs, which is what we need to face down these global headwinds.”