Rachel Reeves is set to convene a meeting with key Cabinet members to emphasize the importance of reducing inflation. The Chancellor will stress the imperative for government departments to refrain from actions that could exacerbate inflation, amid growing criticism.
The meeting, slated for this Thursday, coincides with the upcoming release of inflation data by the Office for National Statistics, expected to reveal a 21-month high of 4% last month. This projected increase in the Consumer Price Index, up from 3.8% in July and August, would indicate that inflation is double the Bank of England’s 2% target.
The latest spike in inflation adds pressure on Labour and the government, just weeks ahead of the Autumn Budget. There are speculations that the government is contemplating eliminating VAT on household energy bills to combat inflation and offer relief to millions of households.
Policies introduced in Rachel Reeves’ previous Budget, such as the rise in employers’ national insurance, have been cited as contributing to the inflationary trend. A Treasury insider mentioned that the Chancellor is focused on addressing the cost of living urgently, exploring various measures including reducing energy bills.
The meeting with select Cabinet ministers on Thursday aims to assess policy decisions within their areas of responsibility that may be driving inflation and increasing costs. This initiative follows a letter from Rachel Reeves and PM Keir Starmer last month, urging colleagues to mitigate policies that raise prices and make efforts to lower costs.
Recently, the International Monetary Fund cautioned that UK households would experience the highest inflation among the world’s seven major economies this year and next. This forecasted increase in prices could reduce the likelihood of an imminent Bank of England rate cut, impacting borrowers but benefiting savers.
While the IMF raised its projection for UK economic growth this year, it lowered the estimate for next year due to concerns about the job market. This mixed economic outlook poses challenges and opportunities for Chancellor Rachel Reeves and Labour, amidst ongoing efforts to navigate the inflationary environment.