UK (Parliament Politics Magazine) – UK inflation dropped to 2.8% in February, boosting Chancellor Rachel Reeves ahead of her spring statement, but food and energy costs remain a concern.
As reported by The Guardian, the latest data shows UK inflation at 2.8%, providing Ms. Reeves with positive news ahead of her spring statement.
Office for National Statistics about UK inflation
The Office for National Statistics revealed that consumer price index reported inflation cooling last month, reversing a rise to 3% in January from 2.5% in December.
City economists expected a slight dip to 2.9%, indicating that inflation is still rising, though it is slowing down.
Bank of England warn about inflation?
The Bank of England has raised concerns about inflation, which may reach 3.7% later this year. This would almost double its 2% target, challenging its capacity to implement further interest rate cuts.
In recent months, inflation has increased due to higher wholesale energy prices and rising food costs, putting further pressure on households. After peaking above 11% in late 2022 to 2% last summer, the headline inflation rate has shown a gradual increase in recent months.
Rachel Reeve’s spring statement
The new inflation figures come ahead of the Chancellor’s address to the Commons on Wednesday. In her speech, Ms Reeves is expected to outline concerning forecasts for the economy and public finances, as projected by the Office for Budget Responsibility.
Following the OBS’s rejection of her savings estimate, Ms. Reeves will announce further welfare cuts in her spring statement.
In an attempt to shift attention away from the continuing benefit cuts, which drew criticism from Labour backbenchers, the Chancellor pledged a £2.2bn boost to defence spending to “secure Britain’s future.”
She will inform MPs of plans to reduce Whitehall budgets by billions of pounds, exceeding earlier projections. Some departments could face losing up to 7% of their funding over the next four years.
In her speech, Ms Reeves will defend the move to increase defence spending, a decision that prompted the resignation of Development Minister Anneliese Dodds in protest over the aid cuts, calling it “the right decision in a more insecure world.”
She will say,
“This government was elected to change our country. To provide security for working people. And deliver a decade of national renewal. That work of change began in July, and I am proud of what we have delivered in just nine months.”
The chancellor is set to confirm that funds will be redirected from the aid budget to defence right away, ending the hopes of some Labour MPs who had hoped the cuts to the development budget would be delayed until 2027.
What did Whitehall sources say about government cuts to public services?
One Whitehall insider stated,
“The government has been clear that departments will have to find more efficiencies. That is why Wes Streeting [the health secretary] has cut NHS England, that is why Liz Kendall [the work and pensions secretary] has made reductions to welfare payments.”
Another source said,
“I don’t know how much longer we can go on pretending this is not austerity when the reality is we’re making cuts to vital public services such as police and prisons.”
What did Paul Johnson say about spending plans and tax hikes?
Paul Johnson, director of the Institute for Fiscal Studies, stated,
“Even a small change to the spending plans is going to make this an even more difficult spending review in June, and I think the bigger risk is that we get speculation starting on Thursday about which taxes are going to rise in the autumn – and I think that is really quite politically risky, and economically damaging.”
What did Sarah Champion say about the impact of the government’s aid cuts?
Sarah Champion, the Labour chair of the international development committee, said,
“The government’s statement on cutting aid has had a chilling effect on development projects and staff morale, but it has also had very real consequences. Contract renewals are paused, and new projects are on hold. Whichever way to pack it, cuts are happening now.”
What did Mel Stride say about the economic slowdown?
Mel Stride, the shadow chancellor, blamed Rachel Reeves, not global events, for the economic slowdown. He stated,
“Our national security demands a strong economy. Yet since Rachel Reeves’s first budget, growth has declined, borrowing has increased, and business confidence has been shattered.”
What did the government spokesperson say about health and disability benefits reforms?
A government spokesperson stated,
“We have set out a sweeping package of reforms to health and disability benefits that genuinely support people back into work, while putting the welfare system on a more sustainable footing so that the safety net is always there to protect those who need it most.”