Responses to August Inflation figures

Conservative response to inflation figures

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

“This morning's news that inflation remains well above target is deeply worrying for families. This is the eleventh consecutive month inflation has exceeded the 2% target.

“Labour's decision to tax jobs and ramp up borrowing is pushing up costs and stoking inflation – making everyday essentials more expensive. With borrowing costs hitting a 27-year high, working people and businesses are bracing for even more tax rises to pay for Labour's mismanagement. 

“While Labour are distracted – lurching from one scandal to the next – families are paying the price for Rachel Reeves' economic mismanagement.”

ENDS

Notes to Editors:

Labour's Autumn Budget taxed work and pushed up borrowing: 

• Rachel Reeves increased taxes by £40 billion a year- meaning that the tax burden will reach a ‘historic high' of 37.7 per cent of GDP. Rachel Reeves raised taxes by £40 billion a year in her first Budget, having only set out £7 billion in manifesto tax plans. In the March 2025 Economic and Fiscal Outlook, Office for Budget Responsibility (OBR) said taxes would rise from 35.3 per cent of GDP to a ‘historic high' of 37.7 per cent in 2027-28 (OBR, Economic and Fiscal Outlook, 26 March 2025, link; The Labour Party, Labour's fiscal plan, 13 June 2024, link).

• Rachel Reeves then changed the fiscal rules to increase borrowing to a record high – breaking her promise not to ‘fiddle the figures'. Despite promising not to ‘fiddle the figures', in the Autumn, Rachel Reeves announced a new fiscal rule – public sector debt net of financial liabilities – meaning that public sector net debt is expected to reach 96.1 per cent of GDP by 2029-30 - the highest level seen outside the pandemic since 2010 (OBR, Economic and Fiscal Outlook, 26 March 2025, link; HM Treasury, Autumn Budget 2024, 30 October 2024, link; Bloomberg, November 2023, link; Philip Aldrick, Twitter, 3 August 2024, link).

As a result, inflation spiked and remains high: 

• Labour's economic management has caused inflation to surge – leaving the UK with the highest inflation in the G7. Following the Autumn Budget, inflation surged from 2.3 per cent in the 12 months to October 2024 to 3.4 per cent in the twelve months to April 2025. From April to July, the twelve-month rate of inflation has not fallen below 3.4 – leaving the UK with the highest inflation in the G7 in June and July 2025 (CRD Analysis, 16 September 2025, available on request).

Borrowing costs have risen to a 27-year high: 

• As Labour MPs spent the summer demanding damaging tax rises that Rachel Reeves refused to rule out, borrowing costs steadily rose, culminating in 30-year gilts rising to 5.72 per cent on 2 September – the highest since 1998 – in a clear vote of no confidence in Labour from the markets.UK 30-year gilt yields reached 5.72 per cent on 2 September 2025, a 27 year-high, compared with 4.689 per cent on election day (Market Watch, 30 Year Gilt, accessed 3 September 2025).

• Andrew Sentence, former Monetary Policy Committee member, said unless Labour's policies are reversed, the country is ‘heading for an economic crash'. SENTANCE: ‘Rachel Reeves is on course to deliver a Healey 1976-style crisis in late 2025 or 26. Like Healey, she has massively boosted public spending, borrowing and taxes – fuelling both demand-pull and cost-push inflation. Unless policies are reversed, we are heading for an economic crash. We've still got bond yields that are even higher than the US. In fact, we're even higher than Greece when it comes to borrowing costs, which is an indictment of where the UK is at the moment, or where it's perceived to be by the financial markets' (The Telegraph, 23 August 2025, link).

• Professor Jagjit Chadha, former head of the National Institute of Social and Economic Research said the fiscal situation is ‘as perilous the period leading up to the IMF loan of 1976'. Speaking to the When Facts Change Substack, Professor Chadha said the financial situation was ‘as perilous the period leading up to the IMF loan of 1976'. Chadha noted: ‘I'm in a world in which I could imagine it [an IMF bailout] happening, and we'll be bereft in that case. We will not be able to roll over debt, we will not be able to meet pensions payments, benefits will be hard to pay out' (The Telegraph, 23 August 2025, link).

Amid economic chaos, Labour lurch from scandal to scandal: 

• Peter Mandelson has resigned as US ambassador after Keir Starmer expressed ‘full confidence' in him following revelations about the ambassador's relationship with Jeffrey Epstein. BADENOCH:‘Does the Prime Minister have full confidence in Peter Mandelson?' STARMER: ‘Let me start by saying the victims of Epstein are at the forefront of our minds. He was a despicable criminal who committed the most heinous crimes and destroy lives of so many women and girls. The ambassador has repeatedly expressed his deep regret for his association with him. He is right to do so, and I have confidence in him, and he is playing an important role in the UK- US relationship' (Prime Ministers Questions, 10 September 2025, archived). 

• This follows the Deputy Prime Minister, Angela Rayner, resigning for underpaying tax. ‘Angela Rayner has resigned as deputy prime minister and housing secretary after failing to pay enough tax on her £800,000 flat in Hove' (BBC News, 5 September 2025, link).

CBI responds to latest inflation data for August 

Martin Sartorius, Principal Economist, CBI, said: 

“Inflation remained elevated in August, consistent with the Bank of England's projections. Higher food and energy prices, alongside the passthrough from increased labour costs, are expected to keep price growth firm in the near term.   

“The Monetary Policy Committee looks set to keep interest rates unchanged tomorrow and, going forward, the MPC faces a delicate balance between signs of a cooling labour market and the risk of price pressures remaining stubbornly high. Its rate decision in November will likely hinge on whether future data give the MPC confidence that a further cut will not contribute to inflation staying elevated for longer."

Inflation Heaping More Pressure On Firms - British Chambers of Commerce

Reacting to the latest inflation data published by the ONS this morning, Stuart Morrison, Research Manager at the British Chambers of Commerce said:  

“Businesses will be worried by inflation holding at 3.8% at a time when cost pressures continue to bite, especially on wages. The BCC's latest economic forecast expects inflation to remain at around this level until the end of the year.  

“Firms are clear that April's rise in national insurance, continued strong wage growth and higher tariffs are all eroding their operating margins. There is also growing concern that sticky inflation will limit the scope for further interest rate cuts.    

“Ahead of the Autumn Budget, our message to the Chancellor is clear – there must be no new tax rises on business. Firms cannot provide the economic growth we all need if they continue to be hampered by rising costs.”