Rishi Sunak is set to say it is imperative that he “hold his nerve” to fulfil his “moral” duty to cut inflation as he resists growing calls to bail out struggling homeowners.
The prime minister is under pressure to offer extra support to squeezed mortgage holders to pay soaring bills as the Bank of England is expected to raise interest rates for the 13th consecutive time.
Labour leader Sir Keir Starmer on Wednesday branded the government’s policy a “mortgage catastrophe” and claimed at PMQs that the spike in interest rates was costing Brits an extra £2,900 each year.
Mr Sunak is set to steadfastly stick to his commitment to halve inflation this year – something he insists he is on course to achieve – in a speech hours after Bank of England decision-makers have met to look at interest rates.
Speaking at the economy-focused PM Connect event in the southeast of England, he will look to reassure workers about the pressures being caused by rising prices.
He is expected to say: “I feel a deep moral responsibility to make sure the money you earn holds its value.
“That’s why our number one priority is to halve inflation this year and get back to the target of 2 per cent.
“And I’m completely confident that if we hold our nerve, we can do so.”
It comes after data from the Office for National Statistics (ONS) released on Wednesday showed that the Consumer Prices Index remained at 8.7 per cent in May.
Acknowledging that this is a concerning time for families and businesses, the prime minister will add: “Beating inflation has to be the priority.
“Because if we don’t get a grip on inflation now, the damage will be worse and longer lasting.”
Sir Keir has repeatedly blamed the current situation on “13 years of Tory failure” and the Conservatives’ “kamikaze budget”.
But both Mr Sunak and chancellor Jeremy Hunt have repeatedly batted off calls to halt their desire to dampen inflation – insisting it will pay off in the long run.
Mr Sunak will also say his government has acted decisively to help struggling households with rising prices and bring down bills for families, as well as taking difficult decisions on spending to make sure it does not fuel inflation further.
Mr Sunak will point to around £3,300 per household his government has given to help with rising costs – funded partly through the windfall tax on energy companies.
This has included holding down energy bills, and a record increase in the national living wage, he will say.
He will claim they have also acted decisively to help struggling households with rising prices and bring down bills for families.
Despite the government’s efforts, inflation has remained stubborn prompting many economists to predict that more interest rate hikes are on the horizon.
Financial markets are tomorrow expecting interest rates to rise by 0.25 percentage points to 4.75 per cent. But there is a chance that the rate could be pushed up even higher, by 0.5 percentage points to 5 per cent.
Figures from the Money Advice Trust show that since March 2022 the number of adults who are behind on one or more household bill has risen from 7.9 million to 11.6 million.
It comes as concerns have mounted over the mortgage market, with the average two-year fixed residential mortgage rate surpassing 6%, according to data from Moneyfactscompare.co.uk.
