Inflation worries emerge as former PM May leads Tory calls for low-tax approach
MPs heard inflation was 3.1% in September.
Theresa May led calls for Rishi Sunak to return to a low-tax, fiscally prudent economic approach amid worries over the impact of inflation.
The Conservative former prime minister welcomed several announcements in the Budget including the Universal Credit taper rate cut, and agreed with the Chancellor that the UK must “start to build the new economy” post-Covid.
But she said the future needs “sure foundations” and acknowledged there are “headwinds” which mean many people are finding it “difficult to manage today”.
MPs heard inflation was 3.1% in September while Mr Sunak said it is “likely to rise further” and noted the Office for Budget Responsibility expects CPI to average 4% over next year.
The Chancellor also expressed his “goal is to reduce taxes” by the end of the current Parliament in 2024.
Mrs May said there is a “debate to be had” about what is going to happen with inflation, telling MPs: “Whether higher inflation is here to stay or just temporary, and of course that does have an impact on interest rates.
“Increased taxes will have both a direct and indirect impact on individuals, as will increased costs in other areas.
“We must never forget, as the Labour Party so often does, that if you increase taxes on business it isn’t the case that people are not hit by that because those increased costs often can’t be absorbed and are passed through to consumers, passed through to members of the public.”
Mrs May also acknowledged there were many references to skills in the Budget but noted she did not hear “any specific reference to green skills”, which are “very important” in order to deliver the new green economy.
In her concluding remarks, she said: “As a Conservative I believe in low taxes, fiscal prudence, sound management of the economy and I look forward to us being able to be in a position to deliver that at the same time we’re delivering that green economy for the future, and that optimistic future (Mr Sunak) referred to in his speech.”
Conservative former cabinet minister Chris Grayling also said he will hold the Chancellor’s “feet to the fire” on delivering on being a low-tax party.
Mr Grayling said: “As Conservatives, we believe in low taxation, of leaving people to make their own choices.
“He (Mr Sunak) set a direction today and my message to the Treasury is that I, and I’m pretty sure an awful lot of people on these benches, am going to be holding his feet to the fire to deliver on that.
“Because we cannot plan a future as a Conservative Party as a big state, high-tax party.
“We are a low state, free enterprise party.
“We know that that is what leads to prosperity.”
Mortgage holders are rightly fearful that this inflationary spike will be met with a rise in interest rates
Mel Stride, Conservative chairman of the Treasury Select Committee, warned “the threat to the public finances through inflation cannot be understated” and the “big debate” is if the increases will be transitory.
He said: “The huge challenge here and danger is that we go into a wage-price spiral, and one of the ways that might happen is if we talk up wages, if we invoke companies to put up wages without a coincident increase in productivity that will simply feed the inflationary tiger, and we have to be very careful on that point.”
He added: “I have a feeling that these inflationary pressures are going to be rather more than many imagine them.”
SNP Westminster leader Ian Blackford said inflation “may well be the defining issue of many budgets to come”, as he cited warnings it could soon hit 5%.
He told MPs: “Mortgage holders are rightly fearful that this inflationary spike will be met with a rise in interest rates.
“The Chancellor seems to think that all of this is merely transitory but complacency on this issue is simply not an option.”