Inflation soared to its highest level in more than a year after April’s steep bill increases, heightening pressure on Chancellor Rachel Reeves over the impact of Labour’s recent tax hike on the cost of living. Official figures show Consumer Prices Index (CPI) inflation jumped to 3.5% in April, up from 2.6% in March and the highest since January 2024. The increase was largely driven by steep hikes in bills for energy, council tax, water, mobile and broadband.
Experts said inflation may also have been pushed higher as many firms responded to the Government’s move to raise National Insurance Contributions (NICs) and the minimum wage last month by increasing prices for consumers. Yet, against all odds, the country’s gross domestic product (GDP) reportedly grew at the fastest pace in a year between January and March. GDP measures the size and health of a country’s economy over a period (usually one quarter or one year).
According to the Office for National Statistics, GDP rose by 0.7% in the quarter, beating predictions of a 0.6% rise and continuing an expansion after growth of 0.1% in the final three months of 2024. The boost was largely driven by the services sector, which many warned would be negatively impacted by the rise in NICs.
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Chancellor Rachel Reeves acknowledged her policies have “consequences” but insisted they are necessary to stabilise the economy.
Asked if the inflation figures had been pushed up by measures including the hike in employers’ national insurance, she told broadcasters: “When I became Chancellor last year, I faced the very difficult challenge that there was a £22 billion black hole in the public finances. We had to fix that, and if we hadn’t done the Bank of England would not have been able to cut interest rates four times this last year, which has obviously had a direct effect on the mortgages and the rents that people pay.
“I do recognise that all policies have consequences, but if I hadn’t acted to stabilise the public finances, we would be in a worse position today.”
Shadow Chancellor Sir Mel Stride blamed Ms Reeves for the hike in inflation. He said: “This morning’s news that inflation is up – and now well above the 2% target – is worrying for families. We left Labour with inflation bang on target, but Labour’s economic mismanagement is pushing up the cost of living for families.
“Higher inflation could also mean interest rates stay higher for longer, hitting family finances hard. Families are paying the price for the Labour Chancellor’s choices.”
The Liberal Democrats also attacked Labour, warning that the cost of living could spiral out of control unless Ms Reeves reverses her decision to increase employer NICs.
The inflation figures may see the Bank of England tread more carefully with cuts to interest rates after this month’s reduction from 4.5% to 4.25%, economists said.