Inflation likely to see further ‘bump’ before prices stabilise, cabinet minister warns – UK politics live

Unite, Britain’s second largest union, has said that workers should not lose out on pay rises because of the inflation crisis. In a statement responding to today’s inflation figures, Sharon Graham, its general secretary, criticised Andrew Bailey, the Bank of England governor, for telling MPs on Monday that employers should show restrain when asking for pay rises. She said:

Earnings are being pummelled, the government is, shamefully, turning its back on those in need and employers are squeezing wages. So, we will absolutely take no more lectures on pay restraint from the millionaire governor of the Bank of England.

If Andrew Bailey wants to lecture anyone about belt-tightening, he should direct his attention to the CEOs of the UK’s top 100 companies who have seen their wages swell by an average of 34 per cent to an astonishing £4.1m a year. Ask them to pause to reflect about the scale of their corporate greed.

Graham also said that that the union would use strike action to protect workers’ wages.

Workers, on the other hand, are at least £70 worse off than this time last year and are being battered by spiralling food and energy costs. Telling them to pay for a crisis which is absolutely not of their making is obscene and totally unacceptable to Unite.

Unite’s answer to the current crisis is that employers who can pay decent wages but won’t will face industrial action. I can tell you that we don’t intend to shift from that.

Graham said that since she became head of the union last summer the union had been involved in more than 300 disputes and that it had won millions of pounds in pay uplifts. She posted about one case on Twitter this morning.

Anne-Marie Trevelyan, the international trade secretary, has warned that inflation will experience a further “bump” before prices are likely to stabilise.

In a Q&A after delivering a speech on green trade at Bloomberg’s HQ in London, she said countries around the world were facing a “a global battle against inflation”. She went on:

This is something we have to tackle across the board.

And the worry we always have is that inflation tends to have two bumps to it.

You have the initial one that is caused by this energy spike and immediate global rise, but what can follow is the longer term impact and indeed through food production and particularly with disruption to Ukraine.

So we know that we will probably have a couple of bumps to get through before we will see, we hope, stabilisation and a reduction as the energy crisis settles.

In their overnight story, my colleagues Rowena Mason, Heather Stewart and Alex Lawson report that one of the options being considered by the government to help people with the cost of living crisis is a temporary cut in VAT. They write:

Rishi Sunak and Boris Johnson have been meeting in recent weeks to thrash out a package to help with the cost of living, but were initially insisting that any policies would not be allowed to cost money.

The chancellor has repeatedly ruled out bringing in an emergency budget that would be needed for fiscal measures such as tax cuts, but is facing a revolt on the Tory benches if he fails to take major action.

A source told the Guardian that officials have been examining a temporary cut to VAT similar to Alistair Darling’s action in 2008 of 2.5% or even as high as 5% but this was dismissed by Treasury sources as too expensive at around £7bn per percentage point cut and a “blunt instrument”.

Experts warn that while a VAT cut would have the effect of cutting prices in the short term, it would then push up inflation whenever it is reversed. “You’re basically moving inflation from this year into what may be an election year,” said one economist.

One person with knowledge of the Treasury’s thinking said: “The debate is, we’re going to have to do something for the poor; do we also need to do something for everyone?”

Aside from a VAT cut, other options that would offer help across the board would include increasing the generosity of the cut in energy bills due to come into effect in October; or bringing forward the income tax cut Sunak has planned for 2024.

The full story is here.

And this is what some other papers are saying about the options being considered by Sunak and Johnson.

• Ben Riley-Smith and Camilla Turner in the Daily Telegraph say ministers are increasingly open to the idea of a windfall tax on energy companies. They report:

It is understood some cabinet ministers are warming to the idea – pushed hard by Labour – given internal polling shows it is popular with voters.

There is also some surprise from ministers and officials involved in talks with oil and gas companies that there has not been more push back to the proposal.

The move could potentially generate billions of pounds at a time for the Treasury when public spending pressures remain high ahead of the autumn budget.

• Steven Swinford in the Times says Sunak is thinking of increasing the warm homes discount, and cutting taxes in the autumn. He says:

From October the warm home discount will give three million of the poorest households in England and Wales £150 off their bills. Treasury officials have drawn up a range of options, including a one-off increase of £300, £500 or even £600 to help households to cope with soaring energy prices …

The warm home top-up, which could cost more than £1 billion, would be directly funded by the government rather than levied on energy bills as under the present system. The chancellor is said to be attracted to the approach in part because there is less risk of it becoming permanent compared with a significant increase in benefits. Kwasi Kwarteng, the business secretary, has proposed raising the discount to £500.

Sunak will follow the intervention on bills with a budget in the autumn. The Treasury is said to favour reducing income tax by 1p in the pound but other ministers believe that cutting VAT would provide a more significant boost to the economy.

Petrol and diesel prices have reached record highs, PA Media reports. PA says:

Statistics from data firm Experian Catalist show the average cost of a litre of petrol at UK forecourts on Tuesday was 167.6p.

The previous record of 167.3p was set on 22 March, the day before a 5p cut in fuel duty was implemented.

Diesel prices continue to climb to new highs, reaching an average of 180.9p per litre on Tuesday.

That was the same day Kwasi Kwarteng, the business secretary, wrote to fuel retailers “to remind them of their responsibilities” following claims retailers hiked profits following the reduction in duty.

Rachel Reeves, the shadow chancellor, told Times Radio this morning that she thought the EU was being “overzealous” in the checks it wanted on goods entering Northern Ireland from Britain under the Northern Ireland protocol. But she said she wanted this resolved through negotiation, and not by the UK suspending parts of the protocol. She said:

I think the EU are being overzealous in the checks.

There are goods that are destined for market in Northern Ireland, never going to leave Northern Ireland, never going to get into the single market, which is what the EU say is their worry.

For those goods that are just moving into Northern Ireland then I just don’t think we need the level of checks the EU are pursuing.

But the way to resolve this is not through megaphone diplomacy, it’s not unilaterally ripping up the protocol, it’s by working in partnership to resolve these very real issues that do exist.

Labour has tabled an amendment to the Queen’s speech motion calling for an emergency budget. Rachel Reeves, the shadow chancellor, told BBC Breakfast that an emergency budget was needed because the government’s response to the cost of living crisis had been inadequate. She said:

Today in parliament, Labour will be calling another vote and urging the government to introduce an emergency budget because it is clear that the actions taken to date by the government did not meet the scale of the challenge.

Families and pensioners are really struggling right now and the government must urgently come forward with additional measures to help people with this incredible increase now.

Labour has been calling for an emergency budget for some time. It has said this should include: a windfall tax, with the proceeds used to cut energy bills; a cut in business rates for small and medium-sized enterprises; the abolition of the national insurance increase; a home insulation programme; and a National Crime Agency investigation into government spending lost to fraud.

Good morning. The most important political story around this morning is the news that inflation reached 9% in April, its highest level for 40 years. Phillip Inman has the detail here.

And my colleague Graeme Wearden is covering reaction on his business live blog.

The inflation figures are normally primarily a concern for economists, but a 9% inflation rate is also a cost of living crisis, and this is certain to dominate the first prime minister’s questions of this parliamentary session, at 12pm.

In the meantime Liz Truss, the foreign secretary, has been doing interviews this morning. Ministers are under intense pressure to unveil an emergency financial package to help people deal with rising costs, and in our overnight story we look at some of the options on the table. Truss told the Today programme that Rishi Sunak, the chancellor, was looking at this “very, very urgently”, but she would not say when any announcement might come.

There have been increasing hints from government that its response might include a windfall tax on energy companies that could be used to fund help for consumers. Sunak firmly opposed the idea when Labour first proposed it, but now he has accepted that it’s an option. The Daily Telegraph today says that internal government polling shows the idea is “wildly popular” with the public – which should be no surprise to anyone because that it was what external polling shows too.

Truss did not get into detail on what the government would, or should, do on the cost of living crisis. But in her interviews she did forcefully intervene in the internal Tory debate on this issue, signalling her disapproval of the windfall tax proposal and suggesting instead that tax cuts were needed. Asked about the windfall tax on Sky News, she said:

The problem with a windfall tax is it makes it difficult to attract future investment into our country. So there is a cost in imposing a tax like that. And my view is lower taxes are the best way to attract more investment, to get the businesses into this country that can create these high-paid jobs, which is what we need to face down these global headwinds.

When it was put to her that the head of BP had said that a windfall tax would not stop his company investing in the UK over the next decade, she replied:

Well, then he can do even more if he’s got more profits that have been raised during this period.

And, on the Today programme, when asked what the government should be doing, Truss again stressed the need for tax cuts – and the importance of investment.

The key response to the huge global inflation crisis we’re facing is to make sure our economy grows. That’s what’s going to help people, it’s going to help people in work, it’s going to help generate the income. To do that we need to attract business investment. We’ve been successful at attracting business investments so far. We need to do more. And what we know is a low-tax economy helps deliver that business investment, helps deliver those jobs.

Truss will almost certainly be a candidate in the next Conservative leadership contest, and for many in the party slashing taxation is a core article of faith. That does not mean Truss was making a leadership pitch today – she says these things because she believes them – but that’s the context within which she is making these arguments.

Here is the agenda for the day.

10.15am: Lord Burnett of Maldon, the lord chief justice, gives evidence to the Lords constitution committee.

12pm: Boris Johnson faces Keir Starmer at PMQs.

1.30pm: Dame Dr Jenny Harries, chief executive at the UK Health Security Agency, and Shona Dunn, second permanent secretary at the Department of Health and Social Care, give evidence to the Commons public accounts committee about contracts with Randox Laboratories.

2.30pm: Liz Truss, the foreign secretary, gives evidence to the Commons foreign affairs committee on international aid.

I try to monitor the comments below the line (BTL) but it is impossible to read them all. If you have a direct question, do include “Andrew” in it somewhere and I’m more likely to find it. I do try to answer questions, and if they are of general interest, I will post the question and reply above the line (ATL), although I can’t promise to do this for everyone.

If you want to attract my attention quickly, it is probably better to use Twitter. I’m on @AndrewSparrow.

Alternatively, you can email me at andrew.sparrow@theguardian.com.