IPPR responds to Bank of England's Monetary Policy Report
Leading think tank calls on government to act to protect people from soaring energy bills
The UK’s leading progressive think tank has responded to the news that inflation is now forecast to reach 13 per cent and that the economy will shrink for five successive quarters from the end of year.
Carsten Jung, senior economist at IPPR said:
“The Bank of England is right to raise interest rates to send a signal that it is willing to act tough on inflation. But slow and steady wins the race, and a smaller increase would have been in line with gradually stabilising the economy and supporting growth.
“When the government passed its support package earlier this year, inflation was expected to peak at only 10 per cent – now it is likely to hit 13 per cent and will stay higher for longer. This could cause a huge increase in the number of households struggling with bills. The new prime minister should immediately pass an emergency budget to upgrade existing support measures, to help millions of people across the country who are seeing their real incomes decline.
“We are not powerless in the face of rising inflation. The government can act to reduce people’s bills directly, including by keeping energy prices from rising too much. It has already done this via an energy discount on bills, and it should double down on this. By reducing energy bills, this can support incomes and dampen inflation. The government has options available to stop inflation becoming entrenched – it should use them”.
Shreya Nanda, an economist at IPPR said:
“Today’s news that inflation is forecast to reach 13 per cent will concern millions of people up and down the country who are already struggling to make ends meet.
“But the good news is that the government has the power to act to support people living on low incomes.
“Taking immediate action to increase targeted support, which could be funded by expanding the windfall tax on energy companies, could help to prevent millions from falling into fuel poverty this winter. Action is urgently needed to increase domestic energy supply and energy efficiency to help tackle this crisis in the medium term.”