Rachel Reeves nightmare as inflation jumps again - YOU pay for her mistakes

Inflation rose again in July, with the consumer prices index (CPI) climbing to 3.8%, according to today’s official figures. That was higher than both June’s 3.6% and the 3.7% analysts had expected. The increase may look modest, but it comes off an already high base and is the highest figure for 19 months.

That was back in January 2024, when Rishi Sunak’s Tories were still in power. Sunak took the blame for inflation then, but its resurgence has happened under Labour, so now it's Reeves’s turn to carry the can.

The Bank of England (BoE) previously warned that inflation could hit 4% next month. After today, that September figure might be even higher.

It also means the BoE is unlikely to cut interest rates again this year, after a controversial reduction in July.

While the Chancellor can't do much about soaring petrol, diesel, food prices and air fares, her disastrous policies have only added fuel to the inflationary fire. Her fingerprints all over today’s numbers.

Much of today’s pain has been stoked by her own fiscal incontinence. Reeves chose to grant generous public sector pay awards, pushing up wages while productivity goes backwards.

She also increased employers’ National Insurance contributions in her Budget, raising costs for businesses that are now passing them on to consumers. At the same time, she hiked the statutory minimum wage by an inflation-busting 6.7%.

Both have driven up wage inflation, as well as wiping out thousands of businesses, especially in retail and hospitality, and hundreds of thousands of jobs.

The Chancellor insists she is boosting living standards, but legislating for higher pay without the productivity to support it simply feeds inflation.

Especially since businesses cannot afford to fund those government-mandated pay rises, and have been choosing to fire staff instead.

Reeves should be looking to rein in public spending, yet she has done the opposite. The government machine is more bloated than ever, and it’s forcing up inflation.

Labour cannot claim the credit for rising wages without accepting the consequences.

While wages have been outpacing prices, rising by 4.6% between April and June, that was down from 5%. With inflation climbing, the two are meeting in the middle.

Reeves needs to acknowledge her role in fuelling the problem. I won't hold my breath. Today's knee-jerk response was to bang on again about her Plan for Change. Whatever that is, it isn't working.

Higher inflation is not just squeezing households, it is also hitting the government’s own finances. In June, the deficit was a massive £20.7billion, far higher than forecast.

Alarmingly, three-quarters of that mighty sum was not money spent on schools or hospitals, but interest payments on Britain’s colossal debt pile.

We’re borrowing to pay interest on our earlier debts, a sure sign that things are getting out of hand.

Today’s inflation surprise means gilt yields are likely to rise again, driving up the cost of servicing the debt still further.

Reeves’s already strained sums will get even trickier, just as she tries to patch up a £50billion black hole in her public finances. The more her borrowing costs rise, the more pressure she’ll be under to hike taxes in the Budget.

The Bank of England claims inflation will fall back later this year, but we have heard that promise before.

Even if it does happen, the respite will come too late to spare Reeves from delivering another punishing round of tax rises this autumn. Her Budget is shaping up to be a horror show, and the British public will once again pay the price for her mistakes.