Government needs to act now as inflation hits 9%
Government needs to act now to prevent repercussions for years to come says Cumbria Chamber’s Managing Director.
It has been 40 years since we last saw inflation reach 9%, and indicators show it’s only set to rise higher. The marked increase in April reflects the continuing upward pressure from surging energy and commodity costs, the energy price cap rises and the reversal of the VAT reduction for hospitality.
Suzanne Caldwell, Cumbria Chamber’s Managing Director reflects on what this means: “This level of inflation is damaging key drivers of UK outputs, including consumer spending (as households come under more and more pressure) and business investment and operation. There’s a significant likelihood now that the UK will be in recession by the third quarter of the year.
“While inflation may moderate a little over the summer, it’s probable to surge to over 10% in October with the expected energy price cap rise. And it’s worth remembering that while households are facing staggering increases despite the cap, businesses don’t have that ‘protection’.
“What’s even more worrying is that while soaring inflation means a June interest rate rise seems inevitable, higher interest rates are unable to address the global factors driving these levels of inflation. At the same time, they risk undermining confidence and aggravating the financial squeeze on businesses and consumers.
“While the UK government can’t directly control global energy and commodity prices, it can and must take steps urgently to alleviate the impact on UK businesses and consumers. We need an immediate emergency budget, including measures to allow businesses to control rising prices, boost productivity and ease cost pressures. These include:
- Reversing the recently introduced National Insurance increase until at least 2023/24, to reduce the cost of doing business.
- Helping businesses manage the impact of rising energy prices by cutting VAT on their energy bills from 20% to 5% for a minimum of one year.
- Addressing labour shortages by reinstating free Covid tests for businesses, to ease the strain on productivity caused by persistent high absences
“These are simple, straightforward measures that can be reversed quickly when the economy is in better shape and that would have an immediate benefit for both businesses and consumers.
If we can ease the pressure on businesses, then they can keep a lid on the prices rises been driven by current pressures and will have the breathing space they need to raise productivity and strengthen the economy. This in turn will enable businesses to create the future profits needed to fill tax coffers.
“If the government doesn’t act now then rising costs will prevent, and indeed reverse, our economic recovery, with repercussions for years to come.”
For more information call Suzanne Caldwell, Managing Director at Cumbria Chamber of Commerce on 07825 050 298 or email suzanne@cumbriachamber.co.uk
© Cumbria Chamber of Commerce