Figures released this morning by the Office for National Statistics (ONS) show inflation fell to 2.6 per cent in June – down from the 2.8 per cent recorded the month before and the lowest rate since March last year.
The slowdown was mostly driven by lower fuel costs at petrol and diesel pumps, while food pressures eased too.
It’s welcome news for new Prime Minister Andy Burnham and his Chancellor John Healey as they look to crack on with their measures aimed at tackling the cost of living.
Whilst the rate of price rises remains well above the Bank of England’s two per cent target, it is trending downwards far faster than the Bank’s forecasts had suggested.
The big driver of this over-pessimistic forecast was food and drink inflation, which is nearly a whole two percentage points lower than the Bank had predicted – suggesting events in the Middle East have not had the knock-on effects from energy to food that everyone feared.
The real question is how long this can last. July’s hike to the energy price cap is certain to push inflation northwards again in next month’s figures – possibly even back over 3 per cent.
All the more reason for Burnham to drive forward his plans to tackle the cost of living. Plans that, we’re told, will be key to every choice every minister makes in every ministry. There’s a sound political logic to this too. Contrast the start of this government with how Starmer began his doomed premiership. Where Starmer’s – economically justified – first move was to slash the winter fuel payment, Burnham is beginning his stint in office with cuts to the cost of living. The plan is that a daily dribble of these announcements will build up public support before he has to dish out the harsher medicine.
Trouble is there’s a touch of Martin Lewis about all these announcements – £45 off energy bills here, £2 bus caps there. None of them are going to change the game. So what is the strategy when inflation resurges and there are even fewer pennies to pinch with?
What we must hear, and soon, is the serious plan to make sure we don’t have these cost of living crises in the first place. Planning reform, a path to sustainable, abundant and cheap energy and serious economic growth. If not, it won't be long before Burnham learns that shaving pennies off bills just isn't enough to keep the electorate at bay.
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