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Sunak and Hunt hail fall in inflation with eye on 2024 election
20 December 2023, 10:44 | Updated: 15 January 2024, 09:01
Prime Minister Rishi Sunak said the latest fall in the inflation rate is ‘good news’ for the country.
A bigger-than-expected fall in inflation could pave the way for tax cuts and an economic boost, Conservatives hope as Rishi Sunak prepares for a general election.
UK inflation eased back to its lowest level for more than two years last month, official figures show, and the Prime Minister said it is “good news for everyone in this country”.
Chancellor Jeremy Hunt said the UK economy is “back on the path to healthy, sustainable growth”, something which could allow him to cut personal taxes in the spring 2024 Budget ahead of the election.
Mr Hunt is expected to use the Budget to set the tone for a general election which could take place later in the spring or autumn.
The Office for National Statistics (ONS) said the rate of Consumer Prices Index inflation fell to 3.9% in November, down from 4.6% in October, and the lowest level since September 2021.
While Mr Sunak has met his self-imposed target of halving the rate of inflation in 2023, prices are still rising at almost twice the level of the Bank of England’s 2% mandate.
Mr Hunt said: “The only way that we can make life better for families who are working very hard and feeling that they are in our cost-of-living crisis, the like of which they hadn’t seen for many, many years, is to get the economy growing sustainably.
“And that means you have to bring down inflation, and that’s why the Prime Minister’s main pledge at the start of this year was to halve inflation. He has more than delivered that.
“Once you do that, once you do the hard work to squeeze inflation out of the system, you can start looking forward to the kind of growth that will see people’s wages going up.
“On top of which, when we can, we want to bring down the tax burden so that people keep more of the money that they earn every month.”
A faster rate of decline in inflation could also prompt the Bank of England to cut interest rates, something which would ease the financial pressure on mortgage holders in election year.
Earlier this month, Bank Governor Andrew Bailey said there is “still some way to go” in policymakers’ efforts to get inflation down as interest rates were maintained at 5.25%, which is a 15-year high.
The central bank also said monetary policy is likely to remain “restrictive for an extended period of time”, contrasting with the message from the US Federal Reserve which is hoping to cut rates next year.
Cabinet minister Mel Stride said if the Bank did cut rates it would benefit households.
He told LBC the faster-than-expected fall in CPI is a “turning point”.
He added: “A greater decrease in inflation of course means that monetary policy might be loosened a little bit more quickly than it would otherwise be – in other words, interest rates coming down.
“Those are matters for the independent Bank of England, they are not for me to predict, but if inflation comes down faster than expected, then that does take some pressure off the Bank of England in terms of keeping interest rates higher, which of course in time and in turn feeds into mortgage rates.”
Before the Bank’s decision to hold rates on December 14, Mr Sunak had also suggested people could “start looking forward to their mortgage rates coming down over time”.
Shadow chancellor Rachel Reeves said: “The fall in inflation will come as a relief to families. However, after 13 years of economic failure under the Conservatives, working people are still worse off.
“Prices are still going up in the shops, household bills are rising, and more than a million people face higher mortgage payments next year after the Conservatives crashed the economy.
“Only the Labour Party under Keir Starmer’s leadership has a long-term plan to make working people better off.”