Afternoon summary
Time for a recap.
Chancellor Jeremy Hunt has rebuffed calls to reintroduce tax relief for people’s mortgage payments, as some Conservative MPs push for more help for families.
Speaking in the House of Commons today, Hunt said that such support would undermine efforts to control inflation, ahead of an eagerly awaited update on the cost of living due tomorrow morning.
The chancellor warned against prolonging the “inflation agony” hitting households, saying:
Much as we sympathise with the difficulties and will do everything we can to help people who are seeing their mortgages costs going up, we won’t do anything that would mean we prolong inflation.
Hunt brushed aside suggestions that the government should cap food prices, telling MPs:
I don’t believe capping prices is the right long-term solution.... I will be meeting the regulators next week to talk further about what needs to be done with respect to supermarkets.
Hunt is also planning to meet with mortgage lenders to discuss what forbearance they can provide to borrowers.
Shadow chancellor Rachel Reeves told MPs that households are being hit by the consequence of the Conservative mini-budget last year and “13 years of economic failure”.
The consumer champion Martin Lewis has said the mortgage “ticking timebomb” he warned the government about last year has “exploded”.
Lewis said on Tuesday that if interest rates were going to be high over three or four years, people were going to have to readjust their finances.
Mortgage rates continue to climb, with the average two-year fixed rate rising to 6.07% today, the highest since November.
Analysis by Bloomberg Economics shows that Britain could tip into a shallow recession if the Bank of England pushes its benchmark lending rate to 6% as investors expect.
Tenants are also being squeezed. New figures from Zoopla show that the average UK tenant now spends more than 28% of their pay before tax on rent
Elsewhere in the cost of living crisis, UK grocery price inflation eased for a third consecutive month in June, lifting hopes that food inflation may have peaked.
New figures from market researcher Kantar show that food inflation dipped to 16.5% in the last year.
Fraser McKevitt, the head of retail and consumer insight at Kantar, said:
“This is the lowest rate of grocery price inflation we’ve seen in 2023, which will be a relief to shoppers and retailers.
“But prices rising at 16.5% isn’t something to celebrate and it’s still the sixth highest monthly figure in the past 15 years. Price rises are now being compared to the increasing rate of grocery inflation seen last summer, which means that it should continue to fall in the coming months, a welcome result for everyone.”
Tomorrow we discover if the official inflation measure dropped in May, with economists predicting a small decline from 8.7% to 8.4%.
In other news….
Britain has fallen six places down the global economic competitiveness rankings because business leaders have lost confidence in the country, due in part to “government incompetence.”
That’s the verdict from IMD’s World Competitiveness Ranking, published today, which raises further questions over Jeremy Hunt’s claim to be “proud” of the UK’s economic record since 2010.
The report found that:
Government incompetence, restrictive immigration laws and a tax regime that hinders growth are damaging the UK’s global success.
The UK has managed inflation worse than its global competitors
The UK fares well on infrastructure and legal frameworks, helping it stay in the top 50% of ranked countries.
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