Rishi Sunak has met his target of halving inflation. The Office for National Statistics announced today that inflation fell to 4.7 per cent last month. That was a sharper fall than expected from last month’s rate of 6.7 per cent, and under half of the 10.7 rate when Sunak first announced his target in January.
Number 10’s choice to piggyback on the Bank of England’s efforts has been vindicated. I’m sure that it gave Downing Street something to cheer, in the hour or two this morning before the Supreme Court piped up. But as welcome as this news might be to Downing Street’s over-eager graphics team, a question still looms: does it matter?
Of course it does, the cry comes back. Inflation is the mugger, robber, and hitman of Ronald Reagan’s imagination. Falling inflation makes it more likely that the Bank of England’s interest rate hikes have peaked. Pressure for them to fall will increase in light of a predicted recession. That offers relief for mortgage owners and the public finances.
But despite the headline rate falling, it is unlikely that voters will either feel much better off, and even more unlikely that they will give Sunak and his newly reshuffled government any credit. The latter point is obvious: reducing inflation is Threadneedle Street’s job. Ministers were always being disingenuous suggesting it was something they could control.
Food price inflation is at a 15-month low. But it is still at 10.1 per cent. That’s obviously not as bad as 20 per cent, which it hit earlier this year. But that’s slim comfort to any voter worried about the escalating price of their weekly shop. Or their stagnant house prices, but I’m less worried about that.
The root cause of inflation’s fall was the reduction in energy prices. Core inflation – which strips out energy and food – is still at 5.7 per cent. Claiming victory now will look premature if escalation in the Middle East causes another energy shock. We still have two months of 2023 figures to go.
Moreover, Sunak trumpeting that he has met one of his pledges only invites voters to look at his progress on the other four. Unfortunately for the Government, it makes for ugly reading for any voters sufficiently bothered to do so, and for any Tory commentator raising their head from the all-encompassing gloom.
The Supreme Court’s ruling leaves his hopes of stopping the boats in tatters. Giving in to the baying backbench mob demanding tax cuts would harm efforts to reduce debt. A recession looms, according to the Cassandras of the Bank of England. Last week saw NHS waiting lists reach 7.8 million – a record.
The UK’s inflation rate is still more than twice the Bank’s target. In the Eurozone it was down to 2.9 per cent in October, and down to 3.2 per cent in the United States. Today’s news may be a shaft of light on an otherwise grim day for Number 10. But it really isn’t something they should be proud of.