Rishi Sunak’s efforts to alleviate the impact of inflation on consumers are unlikely to yield significant results, undermining one of his key promises. Chancellor of the Exchequer Jeremy Hunt met with regulators from key UK industries as the government aims to shift some of the blame for the rising cost of living onto corporate Britain. However, experts believe this meeting is more about politics and optics rather than producing tangible outcomes.
The rate of price increases has remained stubbornly high, more than four times the official target, for the past 14 months. This puts the Prime Minister’s pledge to halve inflation this year at risk. Sunak has refrained from offering direct assistance to struggling consumers, fearing it could further fuel price hikes. Instead, he has urged companies to explore ways to mitigate the impact on consumers.
Vicky Pryce, chief economic adviser at the Centre for Economics and Business Research, believes that the main motive behind Sunak’s actions is to be seen as doing something. Hunt, on the other hand, has limited direct power to intervene but can encourage regulators to fulfill their duties effectively. The meeting included regulators from water, energy, and telecommunications sectors, such as Ofwat, Ofgem, and Ofcom. The Competition and Markets Authority and the Financial Conduct Authority were also present.
In recent weeks, politicians from various parties have focused on the price pressures faced by consumers. The cross-party Business and Trade Committee recently held a hearing where supermarket executives were questioned about potential profiteering from soaring grocery prices. Pryce suggests that the government could alter the regulators’ remit, urging them to take a tougher stance on the companies they oversee. Additionally, certain industries could be required to establish voluntary or even mandatory agreements to keep prices in check. Windfall taxes could also be imposed if an industry is found to be making excessive profits.
While the government does possess tools to combat inflation, they are largely politically unpopular, such as cutting benefits, raising taxes, or increasing immigration. Therefore, the government has resorted to rhetoric, calling on companies to do more. Hunt has criticized banks in the House of Commons for taking too long to pass on higher interest rates to savers. Sunak’s spokesperson, Max Blain, has also stated that the Prime Minister expects supermarkets and other businesses to do everything within their power to assist the public.
In conclusion, Sunak’s push to tackle inflation through companies is unlikely to achieve significant results. The government could explore alternative options, such as altering regulators’ remits, imposing voluntary or mandatory agreements, or introducing windfall taxes. However, politically unpalatable measures may be required to effectively combat inflation.