Personal tax cuts may not be on the cards until soaring prices are brought under control. Ministers have hinted at the possibility as the Bank of England predicted inflation will top 11% in the autumn.
The Bank’s Monetary Policy Committee has raised interest rates to 1.25% – the fifth rise in succession. Meanwhile, Rishi Sunak and Michael Gove appeared to indicate that fellow Conservative MPs pushing for tax cuts would have to wait as such measures could fuel runaway inflation.
The Chancellor told the Bank’s Governor Andrew Bailey that fiscal policy must remain “responsible” and not “exacerbate” inflation. In a letter to Mr Bailey, Mr Sunak wrote: “This is why, in responding to urgent cost of living pressures that people are facing, I announced a series of measures which are timely, targeted, and temporary to help households manage the squeeze on real incomes whilst not adding unnecessarily to inflation”.
