Kate Andrews

This morning, Ofgem announced another reduction in the energy price cap from July. The new cap on the unit price of energy should see costs fall by another 7 per cent, taking £122 off the average household bill. And it didn’t take long for both the Tories and Labour to try to swing the news in their electoral favour. Only two days into an election campaign, the government will want to claim credit for today’s news: an opportunity to remind voters what successive Conservative prime ministers did to protect people from higher energy costs (of course, the Energy Price Guarantee was a large part of the reason markets rebelled against Liz Truss’s mini-Budget, but that’s another story) and to flag that energy costs are now falling.

Would waiting another few months to call a general election have improved the Conservatives’ prospects? Rishi Sunak didn’t touch upon this in his speech today, announcing a general election for 4 July, but it seems likely that their broad assessment was no.  One of the big reasons for waiting until the autumn was the possibility of another fiscal statement. Jeremy Hunt’s March Budget left plenty to be desired by many Tory MPs, who wanted income tax cuts and changes to inheritance tax. The hope was that the public finances would improve in the spring and summer, offering up another chance to craft a tax-cutting narrative – and to give more time for the employee National Insurance tax cuts already implemented to be felt by the public.

The Bank of England’s Monetary Policy Committee has voted to hold interest rates for the sixth time in a row. Members of the MPC voted 7 - 2 to maintain the base rate at 5.25 per cent – with two members voting to cut rates by 0.25 percentage points. This decision will come as no surprise to the markets, which had already factored in a rate hold. The Bank made clear in March that key indicators – including the state of the UK labour market and the risk of inflation rising again – would influence its decision, none of which dramatically changed in the last seven weeks. The Committee repeats from previous reports that monetary policy must ‘remain restrictive for sufficiently long to return inflation to the 2 per cent target sustainably in the medium term’.

It’s all but certain that the UK’s exit from recession will be confirmed at the end of this week. Preliminary Q1 data, released on Friday, is expected to how slow and steady growth in the first three months of the year. It is also very likely that inflation will return to the government target of 2 per cent this month, due to Ofgem’s changes to the energy price cap last month and higher energy costs falling out of the data. The return to target may not last – which is one of the reasons hopes for a spring rate cut have been dashed. But all this will help cushion what is expected to be another decision by the Bank of England to hold rates at 5.25 per cent on Thursday. Threadneedle Street may be erring on the hawkish side, but a rate cut is still expected – possibly this summer.

The Organisation for Economic Cooperation and Development’s (OECD) latest report, published this morning, downgrades Britain's growth prospects this year: from 0.7 per cent (forecast in November last year) to 0.4 per cent. Based on the OECD’s Economic Outlook, Britain and Germany risk experiencing the least growth amongst advanced economies, with Germany coming last this year (with 0.2 per cent growth) and the UK coming last next year (with 1 per cent growth). In response to this morning’s downgrade, Chancellor Jeremy Hunt has said that the ‘forecast is not particularly surprising given our priority for the last year has been to tackle inflation with higher interest rates'.

Labour’s plan to renationalise the railways is not much of a plan at all. Rather, it is a list of goals: to eliminate ‘fragmentation, waste, bureaucracy’, to ‘bring down costs for taxpayers’ and to ‘drive-up standards for passengers’. All lofty ambitions, all lacking a strategy. What little detail we do have points to significantly more bureaucracy. The party plans to set up two more quangos – Great British Railways and the Passenger Standards Authority – which are unlikely to do much to create the more ‘efficient’ system Labour is promising passengers. Still, the announcement has been popular.

Alongside the Prime Minister’s speech on welfare today, the Department for Work and Pensions quietly released updated forecasts. The numbers are stark: DWP expects there to be 3.96 million working-age claimants by 2028-29, a rise from 2.8 million in 2023-24. Meanwhile the number of working-age people receiving disability benefits is forecast to rise to 1.16 million – that’s 160,000 more claimants than was expected just six months ago. These are the numbers Rishi Sunak must grapple with as he sets out his welfare reform agenda.  Back in 2020, then chancellor Rishi Sunak had days to design the furlough scheme.