Chancellor responds to December inflation statistics / Labour response

The Chancellor has responded to the ONS December inflation statistics .

Chancellor of the Exchequer, Jeremy Hunt, said:

"High inflation is a nightmare for family budgets, destroys business investment and leads to strike action, so however tough, we need to stick to our plan to bring it down. 

While any fall in inflation is welcome, we have a plan to go further and halve inflation this year, reduce debt, and grow the economy - but it is vital that we take the difficult decisions needed and see the plan through.

To help families in the meantime, we are providing an average of £3,500 of support for every household over this year and next.”

With inflation now at 10.5%, figures reveal families will spend 9% of their income on energy next year – more than transport, the same as food and four times as much as on clothing

As this morning’s inflation figures come out at 10.5%, 5 times as much as the Bank of England target of 2%, figures reveal how a Tory government has left families feeling worse off.

Labour last week revealed that average energy bills were set to top £10,000 this parliament.

Now, new analysis using these figures reveals that the average household is set to spend 9% of their disposable income on energy in 2023/24, compared to 3% at the beginning of this parliament in 2019/20.

Not only that – but that 9% would mean households end up spending a greater share of their disposable income on energy than they now spend on:

• Food: Families are now spending the same on energy as food (9%)

• Transport: Families are spending more on energy than on transport (includes purchase of vehicles and their running costs, as well as public transport - 8%)

• Recreation and culture: Households are now spending so much of their disposable income on energy that there’s less money at the end of the month to enjoy recreation and culture – including TV and computer equipment, games, outdoor and sports equipment, gardening goods and plants, pets and pet food, sports, cinema, theatre and museum tickets, TV subscriptions, newspapers, books and package holidays. (6%)

Responding to inflation figures this morning, Labour’s Shadow Chancellor Rachel Reeves said:

“Each passing day brings more and more evidence that people are feeling worse off under the Tories.

“That such a huge proportion of household bills will be spent on energy instead of the things families enjoy is a mark of Tory failure on energy security and economic competence.

“This Tory government’s dearth of ambition for Britain is appalling. After 13 years of failure, they may only want our economy survive, but Labour wants it to thrive.

“As the party of sound money, Labour will make our economy stronger, and with our Green Prosperity Plan and mission to make Britain the best place to start and grow a business, we will get it growing again.”

Ends

Notes

• Consumer Prince Inflation, UKK: December 2022 - https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/latest
• The latest family spending statistics refer to April 2020 to March 2021 and reveal that households spent an average of £23.20 a week on energy (Table A1 code 4.4). That is equal to £1,206 a year.
• Comparing the equivalent inflation index (D7CH) in 2021/22 with 2020/21 shows that the price of energy went up by 17%. And comparing the latest index referring to November 2022 shows that the price of energy then doubled between 2021/22 and 2022/23. (ONS code D7CH). This assumes the same level of usage.
• In their Living Standards Outlook published in January 2023, the Resolution Foundation find that energy bills will be a further 40% higher in 2023/24 than in 2022/23. (Figure 17).
• £1,206 a year is equal to 3% of disposable income using the ONS 2020/2021 mean equivalised disposable income figure (Table 1 column C).
• The OBR forecast per capita real household disposable income growth (Economy Supplementary Tables tab 1.5), which is deflated using the consumer expenditure deflator (Economy Supplementary Tables tab 1.5)
• This can be used to work out the cash equivalent of the OBR’s real household disposable income growth forecast.
• And the latest inflation data and the Resolution Foundation forecast of energy price changes can be used to work out how much an average household will be spending on energy in 2022/23.
• Comparing these two figures reveals that an average household is expected to spend almost 10% on energy next year.
• ONS family spending data also reveals that in the April 2020 to March 2021 financial year households spent an average of £45.50 a week on recreation and culture. This is over £2,000 a year, or using the ONS data on average disposable incomes, around 6% of a typical households spending in these areas (Table A1 code 9).  
• Equivalent figures for food is 9% and for transport it is 8% (Table A1 code 1.1 and code 7).