Britain’s government is doing all it can to combat a surge in prices, Rishi Sunak claimed on Wednesday as inflation has hit a fresh 40-year high, climbing 9.1 per cent in the 12 months to May.
The ongoing surge is partly driven by energy costs, after an increase of £700 a year in energy bills came into force last month.
Yet economists fear inflation, the rate at which prices rise, will climb further in the months ahead. The Bank of England estimates it could reach 11 per cent this year.
“We are using all the tools at our disposal to bring inflation down and combat rising prices,” the chancellor said after the figures were announced.
“We can build a stronger economy through independent monetary policy, responsible fiscal policy which doesn’t add to inflationary pressures, and by boosting our long-term productivity and growth.”
Modelling from the Office for National Statistics (ONS) suggested this is the highest rate of inflation since at least February 1982, when inflation reached 10.2 per cent.
Road fuel and food costs were two of the biggest drivers behind the figures, which showed prices climbing across the UK economy. Food prices jumped 8.6 per cent, a 13-year high, up from 6.7 per cent in April, in part due to the impact of Russia’s invasion of Ukraine on global food markets.
The deepening cost of living crisis has triggered the most intense industrial action on British railways in decades this week. Fears are growing that other sectors could go on strike in order to use collective bargaining power to increase pay offers in the public sector.
The government has argued that more generous pay settlements could drive up inflation further, triggering a wage-price spiral of the kind not seen since the 1970s.
“We can build a stronger economy through independent monetary policy, responsible fiscal policy which doesn't add to inflationary pressures, and by boosting our long-term productivity and growth.”
The deputy prime minister, Dominic Raab, told Sky News that the UK must show “restraint” in pay offers for workers because “we know that if public sector pay keeps going up it will only keep inflation high for longer”. Though he admitted that people were now struggling “to make ends meet”.
The government would have to stand firm against strikes in the months ahead, he said, otherwise we just have the “vicious cycle” of elevated inflation for longer. He added that the fundamentals of the UK economy were strong amid a surge in global prices.
“We can’t allow, I’m afraid, the unions in this very militant way they’ve proceeded, to win this argument because it will only hurt the poorest in society,” Mr Raab said.
Unions hit back at the remarks.
TUC general secretary Frances O’Grady said: “With inflation rising twice as fast as average pay, we need a government that will stand up for working people. But instead, we have ministers spoiling for a fight with workers who take action to defend their living standards.
“Let’s be clear, inflation is not being driven by nurses and care workers wanting enough pay to keep food on the table without visiting a foodbank. And if the government does not do more to protect wages and spending, we are at growing risk of a recession that will devastate families and businesses.”
Joanna Elson, its chief executive, said: “With inflation now at 9.1 per cent, rising costs are weighing heavily on household budgets. For many people, the increasing burden of high prices is already taking its toll and is only adding to the difficulty of meeting day to day costs.
“At National Debtline and Business Debtline we are hearing from more and more people with deficit budgets – where their income simply isn’t enough to cover their basic needs. Our worry is that options are running out for people who are already in financial difficulty.”
Ms Elson added that support from government, including the £400 energy rebate, would not be enough for those on the lowest incomes who need “urgent action” including raising benefits in line with the current rate of inflation, rather than a snapshot from last year.
Labour’s shadow chancellor, Rachel Reeves, said that rapid inflation was pushing family finances “to the brink” but that Britons had long faced a “low wage spiral”.
“Over the last decade, Tory mismanagement of our economy has meant living standards and real wages have failed to grow. We need more than sticking plasters to get us back on course – we need stronger, and more secure economy,” Ms Reeves said.
“With Labour’s Climate Investment Pledge, and our plans to buy, make and sell more in Britain, we will build the high wage, high growth, low and stable inflation economy we deserve,” she added.