New figures have shown that thanks to the actions of this Conservative Government we have halved inflation from its peak of 10.7 per cent at the start of the year to 4.6 per cent in October – giving families the immediate relief they need. Inflation is a tax on people’s pockets and halving it is the best thing we could do to help people’s money go further.
Key to this achievement has been resisting calls for additional borrowing and spending that would fuel inflation further. The Government took the difficult decision to control public spending when inflation was at its peak, including resisting pressure to fund above-inflation public sector pay settlements. Meanwhile, Labour wanted weaker public sector pay restraint, which would have meant higher inflation. For example, in January 2023, Shadow Health Secretary Wes Streeting said ten per cent pay rises were ‘reasonable’ – pushing for further borrowing to fund pay deals.
The Government has also introduced ambitious measures to help people back into work, addressing the tight domestic labour market which leaves us exposed to inflationary pressures. We delivered a package of reforms at the Spring Budget to ensure employment remained high, including uncapping pensions and expanding childcare.
In addition, holding down energy prices, one of the main drivers of inflation, and combatting Putin’s weaponisation of Europe’s energy supply has also been essential. The Energy Price Guarantee held down inflation by 2.6 percentage points, whilst the separate Energy Price Cap had a significant impact on the July inflation figures, reducing CPI inflation by 0.97 percentage points.
Further still, the Government delivered tax cuts at the Spring Budget earlier this year to make day-to-day costs less expensive for families. Both the alcohol duty and fuel duty freeze at the Spring Budget reduced CPI inflation by nearly 0.75 percentage points this year, according to the Office for Budget Responsibility.
All of this is in comparison to Labour, who are calling for billions of pounds of borrowing per year – including a plan to borrow £28 billion annually by the second half of their first parliament. The IMF estimates that an increase of public expenditure by even one percentage point would increase inflation by 0.5 percentage points. Thus, decreasing the purchasing power of your wages.
Despite this welcome news, there is no room for complacency and the Government will continue to work to ultimately bring inflation down to the Bank of England’s 2 per cent target.
We have halved inflation, meeting the priority I set out in January.
It's involved hard decisions and fiscal discipline, rejecting calls for higher spending and more borrowing.
As many people continue to struggle, we must stay the course to get inflation all the way back down. https://t.co/FDUH8M6c9E
— Rishi Sunak (@RishiSunak) November 15, 2023
This column was first published in The Forester newspaper.