Rishi told: Bailout risks double-figure inflation

RISHI SUNAK has been warned by Treasury officials that a bailout for households struggling with soaring energy bills could push inflation into double figures.

The Government is seeking to contain a ‘perfect storm’ of price pressures, with rising gas prices – compounded by the Ukraine conflict – an imminent tax hike to pay for Covid and social care, and soaring inflation which is predicted to cause the biggest fall in incomes since the end of the Second World War.

Before the Russian invasion, inflation, currently 5.5 per cent, was forecast to hit a peak of between six and seven per cent, due to a combination of global supply chain issues as the major economies emerged from ‘Covid slumber’. But the conflict has pushed those forecasts as high as nine per cent, and the Chancellor – who has already pumped £21billion into the economy since November to help with the cost of living, including freezing fuel duty and giving a rebate on energy bills – has been warned that any more spending could push the rate into double figures.

A Treasury source said: ‘The situation is very volatile and we don’t yet know what the impact will be.

‘So while inflation keeps ticking up we need to be careful not to exacerbate the problem, because there is always a risk that artificially pumping the economy with more cash could have the opposite effect of what we want and push inflation up even further.’