Predicted inflation fall raises Tory hopes of bounce in the polls
Ministers are banking on a fall in inflation in the coming weeks to boost the Conservatives’ election hopes – as Labour prepares to shift its message on the economy.
The rate of price rises is expected to drop tomorrow and again next month, falling to near the 2 per cent target, while the official end of the recession which began last year is also set to be announced in May.
The Tories have not experienced a rally in their polling position in light of other improvements in the national economic picture.
But the Prime Minister, Rishi Sunak, and his Chancellor, Jeremy Hunt, are understood to be optimistic that may change in the near future, while Labour’s Rachel Reeves will argue that any improving economic news should not outweigh the effects of the cost of living crisis.
Consumer price inflation stands at 3.4 per cent – lower than the average pace of wage rises but still higher than the Bank of England’s target.
A second 2p cut to national insurance came into effect this month, reducing tax bills for almost all workers, although the overall tax burden has risen since the pandemic.
Treasury officials have forecast that the Office for National Statistics (ONS) will announce tomorrow that the rate fell to 3.1 per cent in March.
The rate for April, which will be reported in a few weeks’ time, “will see a big fall to close to 2 per cent”, a senior government source said – due largely to a cut in the energy price cap which governs household gas and electricity bills.
The source added that it was “very likely the recession will be confirmed over” next month as well. ONS data published last week showed that the UK economy grew by 0.3 per cent in
January and 0.1 per cent in February, following six months of negative growth which amounted to a technical recession.
Labour insiders said that they would continue to push the message that the Conservatives have presided over a period of falling living standards despite the improvement this year.
A source said: “People are still worse off. People don’t look at percentages, they look at their own lives. The Tories are looking at the numbers on a graph because they are struggling to understand how people feel.”
In a preview of the Government’s likely election message, the Foreign Secretary, Lord Cameron, said yesterday: “Right now you can see taxes are coming down, inflation is coming down, that means over time interest rates will be coming down – people will see we have a plan and the economy is improving, and the other side don’t have one.”
The Bank of England will make a fresh decision on whether to cut interest rates in three weeks’ time. Most analysts expect the first cut will not come until later this year, and markets have scaled back their expectation of multiple reductions in rates before the general election.