Inflation and energy bills are both set to drop next week in a rare bit of good news for household finances, increasing pressure on Jeremy Hunt for an early tax cut.
The Consumer Prices Index – which measures the average increase in the prices of goods and services purchased by many households – is expected to fall significantly from its current rate of 10.1 per cent on Wednesday.
This is when the Office of National Statistics will deliver its next inflation reading, when economists believe it will fall to between 8 and 8.5 per cent. The Bank of England‘s forecast is that inflation will hit 8.2 per cent across the second quarter of the year, which starts in April.
Lower inflation could spell good news for many mortgage holders, as experts say it may decrease the likelihood of a further interest rate rise next month. It also makes the prospect of the Government lowering taxes more likely as the Treasury will be paying out less to service the country’s debt.
Sir Iain Duncan Smith, the former leader of the Conservative party, said he thought improved inflation figures would give the Chancellor more room to cut taxes.
“The Government needs to lower the historically high burden of taxation from businesses and people forced into upper rate tax,” he told the i . “Only by doing that will we be able to make the case for a Conservative government at the next election.”
Although inflation falling simply means that the rate of price increases slows down, further falls in energy prices are expected later this year, which could drive down inflation further.
Next Thursday, the new energy price cap for July onwards will be announced, and this is going to be good news too. Ofgem’s director for strategy, Neil Kenward, has promised this week it would come “down considerably” from the current level.
Under current limits, a typical household is paying £2,500 per year for their gas and electricity, but projections by analysts at Cornwall Insight suggest this could fall to £2,053 per year from July, a drop of around 18 per cent.
Bank of England could hold interest rates if inflation falls, and the Government could lower taxes
The Chancellor has been under pressure from some of his MPs to cut the basic rate of income tax as soon as possible to boost the economy and help with the cost of living.
Geoffrey Clifton-Brown, Cotswolds MP, 1922 Committee treasurer and deputy chair of Public Accounts Committee, told i : “Inflation not only costs individuals money, it also costs the Government because if you’re embarking on any sort of project you’ve got to allow that much more money to cover the inflationary aspect of it. I would expect [lower inflation] would give the Chancellor a little bit of headroom to start thinking about some tax cuts in maybe the Autumn Statement.”
Former Cabinet minister Simon Clarke said this week: “We need to set out a clear plan to bring income tax rates down and unfreeze the thresholds at which people pay the different rates to reflect the stealth effects of inflation.”
So far, Mr Hunt has been resistant, however, despite analysis by i showing more households had been dragged into the top rate of tax due the freezing of tax thresholds. A family in England and Wales earning a combined £83,000 last year – with one earner on £50,000 and the other on £33,000 – would pay just over £2,000 extra this year in income tax and national insurance.
Government sources argued this week that fighting inflation and reducing national debt had to remain a priority amid fears that cutting taxes would further fuel inflation.
But the Prime Minister has opened the door for an early tax cut thanks to a stronger than expected economy.
Speaking on his way to Japan for the G7 summit, Mr Sunak said: “I’m a low-tax conservative… I want people’s hard work to be rewarded so I do want to be able to bring people’s taxes down. With high inflation and the rate of borrowing it is responsible to deal with that first.”
Experts told i that falls in inflation could mean the Bank of England holds interest rates at their current level rather than increase them, when its next decision is announced on 22 June.
Professor Stephen Millard, deputy director at the National Institute of Economic and Social Research, told i that he did not expect the Bank to raise interest rates assuming inflation does fall to 8.5 per cent, though if inflation stayed in the region of 9-10 per cent, its committee that decides rates would be “concerned”.
He said that if inflation were to fall and the labour market were to continue to “loosen” – meaning there are fewer jobs available – then the committee would be “content with interest rates at their peak, and that they don’t need to go higher”.
Interest rates are unlikely to go down for some time now – not until later on next year, experts believe – but it’s possible they will remain at the current level, at 4.5 per cent.
Andy Haldane, the former Bank of England chief economist who is now an adviser to the Chancellor, said the Bank should “press pause” on raising interest rates because it could risk the economic recovery and leave people facing an even “tighter squeeze”.
Speaking to the New Statesman, he said the recovery was “still on pretty unsteady legs” and that raising rates could pushing Britain into recession.
Mr Haldane, who sits on the Chancellor’s economic advisory council, said the Bank and the Government could “take a bit more time” to bring inflation back down.
I wonder what the genius posters of this sub will attribute a fall in prices to. They’re quick to blame greed when prices rise. So is this energy producers randomly deciding be less greedy all of a sudden?
Imagine inflation being “only” 8.2% being *good news*
Ian Duncan Smith arguing that a slowing of the rise in inflation is grounds to cut taxes. What a clown and what an insult to everyone including the NHS staff that are constantly told that there is no money to pay them competitive market wages
Unless my utility bills that are £400 a month drop back to £120 a month I couldn’t give a fuck about saving a few quid.
>it will fall to between 8 and 8.5 per cent.
Which is still horrific, but be grateful plebs!
Someone please tell the supermarkets! because every week i still see prices rising
Now you watch the US default and inflation go through the roof.
We’ll believe it when it happens. Bank of England and all these bellends constantly “reassuring” the worst is over, that we’ve “hit the peak” only to find out soon after it’s a false summit and there’s plenty more inflation to come.
Hope for the best, plan for the worst. Don’t believe the clowns in charge.
I don’t believe a word of it. I would be very surprised if they stopped raising interest rates this year. They seem to gas light a lot in the media about things getting better in the short term, but their claims sure haven’t come to any fruition so far!
Buckle up, folks.
I paid 1.39 for diesel today, that’s £43 a tank cheaper for me compared to when it hit £2 a litre. At least some things have come down.
I’m sure Rishi has been working hard pulling levers /s
I bet the costs at the supermarket don’t go down though.
Those higher prices are here to stay!
Food prices will take months to come down but will still not come down back to acceptable levels. People will still live in food and fuel poverty, with many more living on the edge of those at the same time. Inflation decreasing just means some people will struggle a bit less, not that people will be well-off again.
Inflation was always going to fall. It’s an annual measurement and if you have a one off hike like a war it automatically drops after 12 months as long as there aren’t other factors added that expand on the first one or an extra event on top of the first like a second war
The whole Tory “We’ll half inflation” is a pointless sound bite designed to make it look like they are vaguely capable of doing anything right. Sunak’s only plan for a general election is to claim financial capability off the back of it. You’ll hear nothing but “We halved inflation, we halved inflation” for the entire of 2024 and we’ll all be sick to the back teeth of hearing it.
Massive amounts of the money we have been paying to energy and fuel first and on to food and super markets has been for profits. It was gouging not inflationary pressures and setting expectations at 8% being good is just more manipulation of the British public to keep us paying the costs of a tiny group of massively wealthy people
Inflation of 8% is still far more than anyone is getting in pay rises.
miracolously just after the local elections fiasco for the torries…
So few people understand that inflation works on a 12 month cycle. It something cost £100 this time last year, with inflation running at 10% for 12 months, even if inflation drops to 0% overnight tomorrow, it still costs £110. How many of you have had 10% increases in your wage in the past 12 months to allow you to break even?
Call me a conspiracy theorist if you like, but it’s super weird how recently news of energy bills dropping circulated and now inflation dropping just after the Tories took an absolute hammering during the local elections.
I’m taking this as goodish news but doesn’t it simply mean that instead of prices rising at, say, 10%, they’ll instead by rising at 8%? So still rising at an alarming rate?
That’s fine but we need actual deflation if we are to get back to a price level that doesn’t make you walk around the supermarket with your draw dragging along the floor.
Look we had a our taste, but lets not take the piss too much.
Ok ok. We will lower it slowly but we haven’t decided exactly what we will let them keep just yet. What is certain, is we are not giving up these wild profits just yet and I will be fucked if it’s going to what it was beforehand.
Every pound you own will be worth 8p less than last year.
We also have to remember that a ‘fall’ in inflation is still a rise on price… It is 8% on top of the 10% which it’s already risen by. It doesn’t mean that we pay less for things, it’s just we pay less than the expected increase. It’s still an increase…
Can someone who is smart explain what this means for house prices and mortgages?
Clickbait. Try refusing all of the cookies on that article.
They think we’re all mugs. Of course energy bills are going to drop in JUNE. That’s the end of Spring start of Summer when people use less energy where heating their homes no longer becomes a requirement to be comfortable.
​
That’s like saying, heating bills will drop during a heatwave. Like we’re too stupid to realize that. No shit Sherlock.
​
OfGEM needs to now insist that energy companies reduce their daily charges to more reasonable levels. Paying something like 50-60p per day right now which is a farce. Open up the markets so people can switch suppliers again. Add some competition to the market.
The language the corrupt Ofgem use is energy prices will “come down considerably”.
​
But…
​
Under current limits, a typical household is paying £2,500 per year for their gas and electricity, but projections by analysts at Cornwall Insight suggest this could fall to £2,053 per year from July, a drop of around 18 per cent.
​
18 per cent is NOT considerably.
Unless our wages are going up by 8.2%, this is still not remotely good news.
Prices are still rocketing, but they aren’t rocketing quite as quickly as they were!
29 comments
[Link without paywall](https://12ft.io/proxy?q=https%3A%2F%2Finews.co.uk%2Finews-lifestyle%2Fmoney%2Fbills%2Finflation-fall-next-week-energy-bills-2350407%3Fico%3Deditors_picks)
Inflation and energy bills are both set to drop next week in a rare bit of good news for household finances, increasing pressure on Jeremy Hunt for an early tax cut.
The Consumer Prices Index – which measures the average increase in the prices of goods and services purchased by many households – is expected to fall significantly from its current rate of 10.1 per cent on Wednesday.
This is when the Office of National Statistics will deliver its next inflation reading, when economists believe it will fall to between 8 and 8.5 per cent. The Bank of England‘s forecast is that inflation will hit 8.2 per cent across the second quarter of the year, which starts in April.
Lower inflation could spell good news for many mortgage holders, as experts say it may decrease the likelihood of a further interest rate rise next month. It also makes the prospect of the Government lowering taxes more likely as the Treasury will be paying out less to service the country’s debt.
Sir Iain Duncan Smith, the former leader of the Conservative party, said he thought improved inflation figures would give the Chancellor more room to cut taxes.
“The Government needs to lower the historically high burden of taxation from businesses and people forced into upper rate tax,” he told the i . “Only by doing that will we be able to make the case for a Conservative government at the next election.”
Although inflation falling simply means that the rate of price increases slows down, further falls in energy prices are expected later this year, which could drive down inflation further.
Next Thursday, the new energy price cap for July onwards will be announced, and this is going to be good news too. Ofgem’s director for strategy, Neil Kenward, has promised this week it would come “down considerably” from the current level.
Under current limits, a typical household is paying £2,500 per year for their gas and electricity, but projections by analysts at Cornwall Insight suggest this could fall to £2,053 per year from July, a drop of around 18 per cent.
Bank of England could hold interest rates if inflation falls, and the Government could lower taxes
The Chancellor has been under pressure from some of his MPs to cut the basic rate of income tax as soon as possible to boost the economy and help with the cost of living.
Geoffrey Clifton-Brown, Cotswolds MP, 1922 Committee treasurer and deputy chair of Public Accounts Committee, told i : “Inflation not only costs individuals money, it also costs the Government because if you’re embarking on any sort of project you’ve got to allow that much more money to cover the inflationary aspect of it. I would expect [lower inflation] would give the Chancellor a little bit of headroom to start thinking about some tax cuts in maybe the Autumn Statement.”
Former Cabinet minister Simon Clarke said this week: “We need to set out a clear plan to bring income tax rates down and unfreeze the thresholds at which people pay the different rates to reflect the stealth effects of inflation.”
So far, Mr Hunt has been resistant, however, despite analysis by i showing more households had been dragged into the top rate of tax due the freezing of tax thresholds. A family in England and Wales earning a combined £83,000 last year – with one earner on £50,000 and the other on £33,000 – would pay just over £2,000 extra this year in income tax and national insurance.
Government sources argued this week that fighting inflation and reducing national debt had to remain a priority amid fears that cutting taxes would further fuel inflation.
But the Prime Minister has opened the door for an early tax cut thanks to a stronger than expected economy.
Speaking on his way to Japan for the G7 summit, Mr Sunak said: “I’m a low-tax conservative… I want people’s hard work to be rewarded so I do want to be able to bring people’s taxes down. With high inflation and the rate of borrowing it is responsible to deal with that first.”
Experts told i that falls in inflation could mean the Bank of England holds interest rates at their current level rather than increase them, when its next decision is announced on 22 June.
Professor Stephen Millard, deputy director at the National Institute of Economic and Social Research, told i that he did not expect the Bank to raise interest rates assuming inflation does fall to 8.5 per cent, though if inflation stayed in the region of 9-10 per cent, its committee that decides rates would be “concerned”.
He said that if inflation were to fall and the labour market were to continue to “loosen” – meaning there are fewer jobs available – then the committee would be “content with interest rates at their peak, and that they don’t need to go higher”.
Interest rates are unlikely to go down for some time now – not until later on next year, experts believe – but it’s possible they will remain at the current level, at 4.5 per cent.
Andy Haldane, the former Bank of England chief economist who is now an adviser to the Chancellor, said the Bank should “press pause” on raising interest rates because it could risk the economic recovery and leave people facing an even “tighter squeeze”.
Speaking to the New Statesman, he said the recovery was “still on pretty unsteady legs” and that raising rates could pushing Britain into recession.
Mr Haldane, who sits on the Chancellor’s economic advisory council, said the Bank and the Government could “take a bit more time” to bring inflation back down.
I wonder what the genius posters of this sub will attribute a fall in prices to. They’re quick to blame greed when prices rise. So is this energy producers randomly deciding be less greedy all of a sudden?
Imagine inflation being “only” 8.2% being *good news*
Ian Duncan Smith arguing that a slowing of the rise in inflation is grounds to cut taxes. What a clown and what an insult to everyone including the NHS staff that are constantly told that there is no money to pay them competitive market wages
Unless my utility bills that are £400 a month drop back to £120 a month I couldn’t give a fuck about saving a few quid.
>it will fall to between 8 and 8.5 per cent.
Which is still horrific, but be grateful plebs!
Someone please tell the supermarkets! because every week i still see prices rising
Now you watch the US default and inflation go through the roof.
We’ll believe it when it happens. Bank of England and all these bellends constantly “reassuring” the worst is over, that we’ve “hit the peak” only to find out soon after it’s a false summit and there’s plenty more inflation to come.
Hope for the best, plan for the worst. Don’t believe the clowns in charge.
I don’t believe a word of it. I would be very surprised if they stopped raising interest rates this year. They seem to gas light a lot in the media about things getting better in the short term, but their claims sure haven’t come to any fruition so far!
Buckle up, folks.
I paid 1.39 for diesel today, that’s £43 a tank cheaper for me compared to when it hit £2 a litre. At least some things have come down.
I’m sure Rishi has been working hard pulling levers /s
I bet the costs at the supermarket don’t go down though.
Those higher prices are here to stay!
Food prices will take months to come down but will still not come down back to acceptable levels. People will still live in food and fuel poverty, with many more living on the edge of those at the same time. Inflation decreasing just means some people will struggle a bit less, not that people will be well-off again.
Inflation was always going to fall. It’s an annual measurement and if you have a one off hike like a war it automatically drops after 12 months as long as there aren’t other factors added that expand on the first one or an extra event on top of the first like a second war
The whole Tory “We’ll half inflation” is a pointless sound bite designed to make it look like they are vaguely capable of doing anything right. Sunak’s only plan for a general election is to claim financial capability off the back of it. You’ll hear nothing but “We halved inflation, we halved inflation” for the entire of 2024 and we’ll all be sick to the back teeth of hearing it.
Massive amounts of the money we have been paying to energy and fuel first and on to food and super markets has been for profits. It was gouging not inflationary pressures and setting expectations at 8% being good is just more manipulation of the British public to keep us paying the costs of a tiny group of massively wealthy people
Inflation of 8% is still far more than anyone is getting in pay rises.
miracolously just after the local elections fiasco for the torries…
So few people understand that inflation works on a 12 month cycle. It something cost £100 this time last year, with inflation running at 10% for 12 months, even if inflation drops to 0% overnight tomorrow, it still costs £110. How many of you have had 10% increases in your wage in the past 12 months to allow you to break even?
Call me a conspiracy theorist if you like, but it’s super weird how recently news of energy bills dropping circulated and now inflation dropping just after the Tories took an absolute hammering during the local elections.
I’m taking this as goodish news but doesn’t it simply mean that instead of prices rising at, say, 10%, they’ll instead by rising at 8%? So still rising at an alarming rate?
That’s fine but we need actual deflation if we are to get back to a price level that doesn’t make you walk around the supermarket with your draw dragging along the floor.
Look we had a our taste, but lets not take the piss too much.
Ok ok. We will lower it slowly but we haven’t decided exactly what we will let them keep just yet. What is certain, is we are not giving up these wild profits just yet and I will be fucked if it’s going to what it was beforehand.
Every pound you own will be worth 8p less than last year.
We also have to remember that a ‘fall’ in inflation is still a rise on price… It is 8% on top of the 10% which it’s already risen by. It doesn’t mean that we pay less for things, it’s just we pay less than the expected increase. It’s still an increase…
Can someone who is smart explain what this means for house prices and mortgages?
Clickbait. Try refusing all of the cookies on that article.
They think we’re all mugs. Of course energy bills are going to drop in JUNE. That’s the end of Spring start of Summer when people use less energy where heating their homes no longer becomes a requirement to be comfortable.
​
That’s like saying, heating bills will drop during a heatwave. Like we’re too stupid to realize that. No shit Sherlock.
​
OfGEM needs to now insist that energy companies reduce their daily charges to more reasonable levels. Paying something like 50-60p per day right now which is a farce. Open up the markets so people can switch suppliers again. Add some competition to the market.
The language the corrupt Ofgem use is energy prices will “come down considerably”.
​
But…
​
Under current limits, a typical household is paying £2,500 per year for their gas and electricity, but projections by analysts at Cornwall Insight suggest this could fall to £2,053 per year from July, a drop of around 18 per cent.
​
18 per cent is NOT considerably.
Unless our wages are going up by 8.2%, this is still not remotely good news.
Prices are still rocketing, but they aren’t rocketing quite as quickly as they were!