Chancellor Rachel Reeves has ordered a high-level Cabinet meeting ahead of the Budget, as worrying figures are expected to show inflation has hit a 21-month high
Rachel Reeves is to hold a meeting with top Cabinet colleagues to hammer home the need to drive down inflation.
The Chancellor will reiterate the need for government departments to avoid anything that will further drive up inflation, in the face of mounting criticism.
The meeting, scheduled for Thursday this week, comes as figures on Wednesday from the Office for National Statistics are expected to show the rate of inflation hit a 21-month high of 4% last month. The forecast rise in the Consumer Price Index – from 3.8% in July and August – would mean inflation is running at double the Bank of England’s 2% target.
The latest increase will pile yet more pressure on Labour, and the government, coming weeks before the Autumn Budget.
It comes amid speculation that the government is considering scrapping VAT on household energy bills, a move that would both push down on inflation and provide some relief for millions of households.
Measures announced in Ms Reeves’ Budget last year, including the hike in employers’ national insurance, have been blamed for further stoking prices.
A Treasury source said: “The Chancellor’s view is that tackling the cost of living is urgent, and everything is on the table – including measures to bring down energy bills. She’s getting the whole of government to play its part, it’s her number one focus.”
Thursday’s meeting with select Cabinet ministers is designed to review policy decisions in their brief that may be contributing towards inflation and higher costs.
It follows a letter from Ms Reeves and PM Keir Starmer last month to colleagues which said: “Policies that push up prices, including levies on bills and measures that push up bills in regulated sectors all make it harder to get inflation down. We must do everything in our powers to keep these costs down and lower them.”
It comes after the International Monetary Fund warned recently that households in the UK will suffer the highest inflation of any of the world’s seven biggest economies this year and next. The influential economic body said prices here would increase more sharply than expected in both years compared with its previous forecasts in July.
Experts warned it made the chances of another Bank of England rate any time soon cut less likely, in a blow to borrowers but a boost to savers.
There was better news for Chancellor Rachel Reeves and Labour as the IMF upped its forecast for UK economic growth for this year. However, it also cut its estimate for next year because of concerns over the jobs market.