Sunak: UK has ‘tools at our disposal’ to tackle 40-year high inflation

The UK has “the tools at our disposal” to tackle the worst inflation spike in four decades, the chancellor urged today.

Responding to a grilling by MPs in the house of commons, chancellor Rishi Sunak said Britain is “not immune” to the inflationary “shocks” that are sweeping through the world’s richest economies.

Prices have climbed 9.1 per cent over the last year in Britain, the fastest acceleration since the 1980s and the highest level in the G7. They are also rising at historic rates in the US and Europe.

However, UK inflation is expected to top 11 per cent, according to the Bank of England, caused by the energy watchdog lifting the cap on bills again to account for higher wholesale oil and gas prices.

“We do have the determination we need to combat inflation,” Sunak insisted. 

He said prudent government spending and an independent Bank of England have given the UK effective policy levers to tame the cost of living.

Soaring food and energy prices driven by supply and demand mismatches as a result of supply chain disruption have propelled inflation. 

Although price pressures have been amplified by Russia’s invasion of Ukraine leaving basic food stuffs marooned in silos and squeezing energy flows through Europe, Britain was already suffering from an inflation jump before Moscow sent troops into Ukraine.

The UK is experiencing both the energy shock that is hitting Europe and the “tight labour market” that is putting upward pressure on prices in the US, the chancellor said.

Rising living costs are disproportionately hitting the poorest hardest due to this group spending a larger chunk of their income on food and energy bills.

The government has launched over £30bn in support to cushion the blow to household finances caused by the cost of living crisis.

People on means-tested benefits will this year receive £650 and every household in the UK will pocket a £400 grant toward their energy bills.

Next month, the national insurance threshold will rise to over £12,000, in line with the income tax threshold, reducing workers’ tax bills.