Chancellor responds to December inflation figures + reactions

Consumer price inflation, UK: December 2024

Chancellor of Exchequer Rachel Reeves said:

“There is still work to be done to help families across the country with the cost of living. That's why the Government has taken action to protect working people's payslips from higher taxes, frozen fuel duty and boosted the national minimum wage.

“In our Plan for Change, we were clear that growth is our number one priority to put more money in the pockets of working people. I will fight every day to deliver that growth and improve living standards in every part of the UK.”

Further information

• Inflation has returned close to target from a high of over 11%, and the OBR expect it to remain close to the 2% target throughout the forecast period.
• But we know that for millions of people the cost of living crisis is not over. This is why at Autumn Budget we protected payslips from higher taxes, gave a pay rise to 3 million workers next year and kept prices down at the pumps by freezing fuel duty, saving drivers £3 billion next year alone.
• We are also targeting support with the largest increase to the Carer's Allowance earnings limit since it was introduced in 1976 – worth £41 a week. And we have capped the amount that can be cut from Universal Credit payments when repaying short-term loans and debts, saving 1.2 million of the poorest families in the UK £420 a year.
• We have also spent £1 billion to extend the Household Support Fund and Discretionary Housing Payments, increased working age benefits in line with inflation and increased the full new state pension by £470 next year, on top of a £900 this year.
• We have done all that against the backdrop of shoring up the public purse after inheriting a £22bn blackhole. There is more we want to do to lift living standards across the country and make people feel better off - but we are making progress.
• The ‘effective' interest rate – the actual interest paid – on newly drawn mortgages decreased by 15 basis points, to 4.61% in October, the lowest since May 2023. The average two year fixed mortgage rate is now about half a percentage point lower than it was at the election. We want to support more people with the aspiration to own their own home.
• Price stability is an essential pre-requisite for economic growth, so we will continue to support the independent Monetary Policy Committee as it acts to return inflation to the 2% target sustainably.
• The rise in inflation remains a global challenge, with inflation rising in nearly every G7 country over November.
• The OBR forecast that inflation would rise in Q4 in their Autumn forecast, partially due to higher gas and energy prices.
• Volatility in energy markets in response to changes in the global economy, geo-political factors and broader policy changes is normal. These global movements are a key driver of changes in domestic inflation.

Conservative response to CPI statistics 

Mel Stride MP, Shadow Chancellor of the Exchequer, said: 

“Whilst this month's reduction in inflation is welcome news, there are still challenges ahead, not least the National Insurance hikes - which some of will be passed on in higher prices - have yet to bite. 

“What is key for our economy is to get growth going, but this has been killed stone dead by this government. The Chancellor needs to urgently explain how she will now achieve this.” 

Low growth and high interest rates, not inflation, are the real economic challenge, says IPPR 

IPPR have reacted to this morning's ONS data release of CPI data for December 2024: 

Dr George Dibb, associate director for economic policy at IPPR, said: 

“Inflation figures are coming down, they remain only slightly above the most recent Bank of England forecast, and below what the Bank expected only a few months ago. Closely watched core inflation also continues to ease which shows that the British economy continues to be on track for disinflation. This latest data reinforces the fact that inflation does not pose an immediate cause for concern for the economy.  

“The real warning light remains the UK's weaker-than-expected growth. With the latest data from before the budget lagging behind the Bank's own projections. High interest rates are stifling growth, as we've repeatedly warned, and this slowdown is driven by tight monetary policy—not the new government's policies. To boost growth and economic prosperity we need interest rates to come down.”