Inflation drops despite warnings over household bills and council funding

The latest data from the Office for National Statistics (ONS) found that inflation dropped to 10.1 last month, the lowest level since September, with lower fuel costs slowing the pace of price rises.

The figures could see the Bank of England cease its hikes to interest rates, after Andrew Bailey, the Bank’s governor, previously suggested that the UK had been “turning the corner” on inflation.

Jeremy Hunt yesterday said that although the fall in inflation was “welcome” the battle was “far from over”.

“High inflation strangles growth and causes pain for families and businesses – that’s why we must stick to the plan to halve inflation this year, reduce debt and grow the economy,” said the Chancellor.

His comments come ahead of the budget next month, which is likely to see only minimal reforms, rather than the tax cuts demanded from the Tory benches and supporters of the former prime minister Liz Truss.

The former Bank of England economist, Sir Charlie Bean, predicted that Mr Hunt will have some “wiggle room” for changes to childcare which have been floated in recent weeks by groups such as the Confederation of British Industry (CBI).

He told the i newspaper that he felt it would be “quite difficult” for Mr Hunt to cut something such income tax.

Other “supply side” reforms could include GPs being told to sign off fewer people with sick notes to keep them in employment to address the productivity crisis following the pandemic, the Telegraph reported yesterday.

The Resolution Foundation think tank predicted that the 15 March budget will likely also include an extension on the Government’s Energy Price Guarantee as household energy bills are set to rise despite the cost of wholesale gas falling.

“The Chancellor rightly wants a calmer, smoother Budget in March, while households – particularly those on lower incomes – need smooth energy costs,” it said.

Today the StepChange debt charity warned that more than two in five people are rationing day-to-day necessities or relying on others in order to keep up with credit repayments.

These included missing essential bills, or rationing energy use, the YouGov survey found.

It comes as new analysis shows that the Government’s levelling up project has failed to significantly reduce the gaps between the spending power of councils in the poorest and wealthiest areas of the country.

Research by LG Improve examined the annual changes in council funding including council tax, business rates and grants since austerity.

It found that richer areas are able to rely on historically higher council tax from more expensive properties to fund services, while poorer areas continue to lag behind after reductions in government grants.

The five poorest areas in the UK, including Kingston upon Hull, will see their spending power increase by 7 per cent by next year, less than a third of the rate of the least deprived areas in the country such as Richmond upon Thames.

But LG Improve financial resilience director Dan Bates said his analysis shows the “frailty of a system more reliant on local taxpayers to fund services”.

“In reality, additional funding and a much fairer approach to resource distribution is needed if the Government is to deliver any meaningful levelling-up agenda,” he said.

A spokesperson from the Department for Levelling Up, Housing and Communities said it had made almost £60 billion available over the next financial year for councils, with the most deprived areas of England receiving 17 per cent more per household this year than the least deprived.