Households are facing the highest inflation for 40 years and the cost-of-living squeeze is expected to get even worse.
18 May 2022
Boris Johnson hinted at future help for people struggling with the rising cost-of-living, but there was no immediate extra support as inflation hit a 40-year high.
The Prime Minister and Chancellor Rishi Sunak are under intense pressure to act after Consumer Prices Index inflation soared to 9% in the year to April, up from 7% in March, according to the Office for National Statistics (ONS).
Mr Sunak warned that he could not “protect people completely” from the cost-of-living squeeze, but the Prime Minister promised to “look at all the measures that we need” to get people “through to the other side” of the inflation spike.
Mr Johnson suggested that part of the rise in energy prices was because of the “tough” decision to sanction Russia following the invasion of Ukraine.
The rise in CPI was the fastest measured rate since records began in 1989, and the ONS estimates it was the highest since 1982.
The Bank of England 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 war in Ukraine.
Mr Sunak 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.”
Opposition parties and some Tory MPs want to impose a windfall tax on oil and gas companies which have enjoyed bumper profits as a result of high global prices.
The money raised would be used to alleviate the pressure on households.
At Prime Minister’s Questions Mr Johnson was repeatedly pressed on the issue by Labour leader Sir Keir Starmer.
Mr Johnson said the Government was “not, in principle, in favour of higher taxation” but promised a “sensible approach, governed by the impact on investment and jobs” – ministers have argued that a windfall tax would deter investment by the oil and gas giants.
“Of course we will look at all the measures that we need to take to get people through to the other side, but the only reason we can do that is because we took the tough decisions that were necessary during the pandemic,” he said.
The Prime Minister added: “We always knew that there would be a short-term cost in weaning ourselves off Putin’s hydrocarbons and in sanctioning the Russian economy.
“Everybody in this House voted for those sanctions. We knew that it would be tough but… giving in, not sticking the course, would ultimately be the far greater economic risk.”
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 faces calls for more action immediately, rather than waiting for the autumn budget, with inflation set to increase further this year.
Reports have suggested that measures including increasing the warm home discount by up to £600 to cope with rising energy bills are under consideration.
The Times suggested that the package to help with energy bills could be unveiled in July followed by tax cuts in the autumn.
The I newspaper reported that Mr Sunak was plotting a 1p cut in income tax from April 2023, a year earlier than planned.
The Confederation of British Industry (CBI) 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.
Shadow chancellor Rachel Reeves demanded a full emergency budget to address the crisis in living standards.
She said: “Today’s inflation data will add to the worries families already face as prices soar and pay packets are crunched.”
Liberal Democrat Leader Sir Ed Davey said: “Families and pensioners on the brink need saving from soaring inflation but this Conservative government is nowhere to be found.
“We need an emergency VAT cut now to slash prices at the till and fuel pump today.
“The warning lights are all flashing red and Boris Johnson hasn’t a second to lose.”
Imran Hussain, director of policy and campaigns at charity Action for Children, said: “These grim figures make clear that more and more families are starting to run out of road as they face inflation at its highest level in a generation, spiralling energy bills set to rise further and an entirely inadequate benefits system.
“They need help with meeting basic living costs now, not warm words hinting at action in the future.”