Pressure on Hunt to slash taxes as PM hits his target to halve inflation
CHANCELLOR Jeremy Hunt has come under renewed pressure to cut taxes next week after the Government declared victory in its pledge to halve the rate of inflation.
Official figures showed inflation fell by more than expected to 4.6 per cent in October – its lowest level for two years. Experts had forecast a rate of 4.8 per cent.
The drop, from 6.7 per cent in September, was the biggest one-month decline in the annual rate of inflation since records began in 1992.
It means that Prime Minister Rishi Sunak has met his pledge to halve inflation made at the start of this year when it stood at more than 10 per cent.
And Chancellor Jeremy Hunt signalled that it could mean a change of tack on economic policy. ‘Now we are beginning to win the battle against inflation we can move to the next part of our economic plan, which is the long-term growth of the economy,’ he said.
Economists and Tory MPs said the fall in inflation gave Mr Hunt room to cut taxes in next week’s Autumn Statement.
The watershed moment in the cost-of-living crisis – which had seen inflation surge to as high as 11.1 per cent last autumn – should also offer leeway to the Bank of England to cut interest rates sooner, providing relief for borrowers.
Mr Sunak said: ‘In January I made halving inflation this year my top priority. Today, we have delivered on that pledge.’
Julian Jessop, at the Institute of Economic Affairs, said: ‘The sharp fall... should slam the door on any further increases in interest rates and bring forward the timing of the first cut.’ It also ‘removes at least one obstacle to tax cuts in the Autumn Statement’, Mr Jessop added.
The fall in inflation is mainly the result of lower energy prices. Also, food price inflation has eased. Both were driven up by the war in Ukraine.
The Bank of England’s remit is to try to lower inflation to 2 per cent so it is shying away from talk of rate cuts for now. However, financial markets are increasingly confident of one by June next year.
Reports suggest Mr Hunt could extend tax breaks for business investment in the Autumn Statement but some experts think he may be tempted to target inheritance tax and stamp duty.
Mortgage lenders are cutting interest rates as the likelihood of a Bank of England rate cut increases.
Some brokers think homeloan rates could fall below 4 per cent by January, a relief to borrowers looking to buy or move to a new deal. Competition between lenders could help revive the housing market.
HSBC yesterday became the latest bank to cut rates, with a number of its mortgage deals now at less than 5 per cent.