The Chancellor spoke yesterday after figures revealed inflation had surged to 5.4 per cent last month – its highest rate since March 1992 – as the nation’s cost-of-living crunch intensified. With gas and electricity costs set to rise further and Bank of England boss Andrew Bailey suggesting energy prices might not come down until 2023, experts have warned inflation could climb even higher in the coming months.
However, others say they expect inflation to begin falling in the summer and are predicting a “rosy” 2022 for the UK economy. Households have so far had their energy bills kept in check by the Government’s price cap, which limits the amount suppliers can charge. But the limit is set to be revised on April 1.
The energy industry has warned that it could mean family fuel bills surging by another 50 per cent. Mr Sunak said the Government was providing £12billion in support for struggling families in changes to the Universal Credit benefit, freezes in alcohol and fuel duties and targeted help for households.
The Chancellor added: “I understand the pressures people are facing with the cost of living. We will continue to listen to people’s concerns as we have done throughout the pandemic.”
Yesterday’s Office for National Statistics (ONS) figures showed the consumer price index measure of inflation, up from 5.1 per cent in November, was higher than expected as the price of food, furniture and clothing surged, along with restaurant and hotel bills.
Food had a year-on-year price increase of 4.2 per cent – the highest rate since September 2013 – and inflation on clothing was at a four-and-a-half-year high. That is adding to continued pressure caused by energy bill hikes seen in October and fuel prices that have climbed to record levels.
In addition, there has been a increase in demand for used cars as world chip shortages squeeze the supply of new vehicles. The ONS measured household utility bills inflation at its highest rate since November 2011.
The latest figures emerged a day after official data showed any wage rises for UK workers were already being wiped out by rocketing prices, even before the latest uptick. Meanwhile, the Bank of England is coming under increasing pressure to act to cool inflation.
Last month the Bank raised interest rates from 0.1 per cent to 0.25 per cent and experts have pencilled in another back-to-back rate increase at its next meeting in February. Mr Bailey told MPs on the Treasury Select Committee that the Bank could do little to bring down gas prices or ease disruption to the global supply chain. But he pledged it would do “whatever we can”.
However, the respected Centre for Economics and Business Research (CEBR) said it expects inflation to peak at 5.9 per cent between April and June, before easing to 3.1 per cent in the last quarter of this year.
CEBR economist Pushpin Singh said yesterday: “Today’s UK inflation figures came in higher than expected, with price rises as measured by the CPI reaching a near 30-year high of 5.4 per cent in December.
“This marks the highest rate since March 1992, though there are signs pointing to the view that inflation is now peaking. Today’s figures come on the back of the Bank of England’s base rate hike in December to combat surging inflation.”
Mr Singh added: “With November’s figures indicating strong output growth and a resilient postfurlough labour market, along with mounting evidence of the UK having moved past its Omicron peak, the UK seems well-poised to continue its economic recovery into 2022.”