Jeremy Hunt discusses tackling problems with inflation
Conservative MPs are privately warning Chancellor Jeremy Hunt that he needs to intervene with the Bank of England or he will fail to deliver on the Government’s key pledge to halve inflation.
Senior Tories have told Express.co.uk that the Bank of England under Governor Andrew Bailey has “taken its eye off the ball” while others have said that its independence needs to be reviewed.
The row has broken out again at the CPI rate of inflation, which includes house prices and mortgages, has remained stubbornly high according to the latest ONS figures.
The rate remained at 8.7 percent in May, the same as April, despite a Bank of England prediction that it would fall to 8.4 percent.
With Rishi Sunak putting halving inflation as one of his five pledges, there are now serious concerns that his government will fail to deliver.
A former cabinet minister told Express.co.uk: “The truth is that the management of the Bank of England were missing in action.
“They took too long to act last year, and people are paying the price now.
“As rates go higher than they would have needed to had they acted sooner, the government should look at reintroducing MIRAS (mortgage interest relief at source) to help hardworking people keep their homes.”
MIRAS was abolished by Gordon Brown who also was responsible for making the Bank of England independent outside democratic accountability in the government.
Criticism of the current economic policy is coming from across the Tory backbenches but much of it is coming from Liz Truss’s Conservatives for Growth group, who now believe the former Prime Minister’s controversial mini budget which led to her being ousted is being increasingly vindicated.
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In particular many of them believe that the inaction of the Bank of England was what triggered the economic crisis in the wake of Ms Truss’ mini budget.
Thanet South MP Craig Mackinlay said: “The Bank of England’s blunt lever of interest rate rises to curb inflation might have been appropriate in the ‘90s but I’m increasingly concerned it’s the wrong medicine today.
“Perversely, raising interest rates may now be fuelling the inflation it’s meant to solve as higher loan costs to households and businesses means higher wage demands and higher prices leading to a doom loop of unstoppable inflation.
“It’s clear the clever spreadsheets used by the Bank over the last few years with hyper-low interest rates and excessive quantitative easing have failed.
“I have no confidence in what they are now doing which may lead to true economic misery.”
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Another Conservative MP said that he and other colleagues now believe “there needs to be a rethink” of the Bank of England’s independence.
The Tory MP said: “Really it is consistantly getting things wrong and failing to properly predict events.
“Independence was never supposed to be absolute but we need some accountability here and the Chancellor has to be able to intervene.”
However, Chancellor Jeremy Hunt today insisted the government will not change course.
He said: “Today’s figures strengthen the case for the government to stick to its guns.
“No matter what the pressure from left, right or centre, we won’t be pushed off course because if we are going to help families, if we are going to relive the pressure for peopple on mortgages and with businesses, we need to squeezer every last drop of high inflation out of the economy.”
He added: “If you loook at what is happening in other countries you can see that rises in interest rates do bring down inflation over time.
“That wil happen here but we need to be patient we need to stick to the course and then we will get to the other side.”
Labour have pointed to the rise in the price of food.
Shadow Chancellor Rachel Reeve pointed out that the increase in food prices in the UK is 20 percent faster than France, 30 percent quicker than Germany and three times that of the USA.
She said: “That difference is leaving Brits paying over £1,000 a year more for food.
“This government can’t get a grip of this problem because they are the problem.
“Thirteen years of the Tories and their disastrous mini-Budget are damaging economic security and leaving families worse off.
“We need a more secure economy, more secure family finances and a plan to help us grab hold of the opportunities before us.
“With a relentless focus on the cost of living, our strong fiscal rules and our mission for growth, that is what a Labour government will bring.”
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