Inflation has hit a 40-year high of 9%, prompting the chancellor to pledge targeted tax cuts for businesses.
The annual rate of CPI inflation rose to 9% in April, up from 7% in March, according to the Office for National Statistics. It is the highest level since 1982. City economists had forecast a rise to 9.1%.
Grant Fitzner, chief economist at the ONS, said: “Around three-quarters of the increase in the annual rate [of inflation] this month came from utility bills.”
Chancellor Rishi Sunak told the CBI that there was no single measure the government could take to shield people from soaring inflation.
However, he has pledged targeted tax cuts for business in the Budget later this year, designed to boost investment ahead of a sharp rise in headline corporation tax from next spring.
“There is no measure any government could take, no law we could pass, that can make these global forces disappear overnight,” he said. “The next few months will be tough. But where we can act, we will.”
The chancellor is facing mounting pressure to cut taxes to avoid a cost of living “tsunami”. Liz Truss, the foreign secretary, and Alister Jack, the Scottish secretary, said publicly yesterday that they favoured tax cuts to address the crisis.
Sunak has pledged to cut income tax by 1p in the pound in 2024. Cabinet ministers are pressing him to announce a 1p cut this autumn. Some privately agree with Labour’s calls for an emergency Budget to bring forward tax cuts sooner.
Sunak promised he would cut business taxes in his autumn Budget to encourage investment, although a pre-announced rise in corporation tax from 19p to 25p is still scheduled to go ahead next April.
Number 10 is resisting pressure for a windfall tax on energy companies on the grounds that it would be “ideologically un-Conservative”.
Treasury officials believe the levy is “politically unavoidable” but are being blocked by the prime minister’s advisers.
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