The Consumer Prices Index (CPI) measure of inflation rose to 3.5 per cent in the year to April, according to the Office for National Statistics (ONS) – well above the Bank of England’s two per cent target.
Although the responsibility for returning the inflation figure to its target lies with the Bank of England, there are steps that Rachel Reeves could take to help reduce it.
Cutting energy and water bills
As of the start of April, water bills have also risen, by an average £123 a year, according to Water UK.
Thomas Pugh, an economist at RSM, said: “In terms of bringing down inflation, the obvious areas of focus would be action to reduce energy and water bills, either through reform of the electricity market – which is one of the main reasons we have some of the highest energy bills in the world – or more government investment or subsidies.”
The move was set to increase Government revenue by £25bn a year.
Laith Khalaf, head of investment analysis at AJ Bell, said: “The Chancellor will be relying on the Bank of England to keep inflation in check through interest rate policy.
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Some have called for a reversal to the contributions.
However, others added it might not make a major difference to inflation.
James Smith, and economist at ING, added: “The NI hike and hike in the national living wage in theory adds extra indirect pressure, though there’s little sign of that.
“Tax rises, and increases in regulated prices, take money away from consumers and will drag on economic growth, which in the medium term takes some of the steam out of inflation.”
Help bring an end to the tariff war
The blanket 10 per cent tariffs apply to most goods from the UK, but there are ongoing negotiations over some products.
Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “There are some things that would be enormously positive both in terms of inflation and politics – including some kind of deal that removes the UK from international tariffs.
Avoid above-inflation pay increases
The latest figures show that annual growth in employees’ average earnings, for regular earnings excluding bonuses, was 5.6 per cent, and total earnings (including bonuses) was 5.5 per cent.
This is because when people have more money to spend, demand for goods and services can rise and lead to higher prices.
“However, this will be politically challenging for them given the relationship with the unions, current poll ratings and their recent track record of awarding pay rises in the public sector.”
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