Sunak struggles to deflect inflation blame onto corporate Britain

British prime minister Rishi Sunak.

British prime minister Rishi Sunak’s push to get companies soften the blow of inflation on consumers appears unlikely to yield significant results, undercutting one of his key pledges.

Chancellor of the Exchequer Jeremy Hunt met regulators of key UK industries as the UK government seeks to deflect some of the blame for the cost-of-living squeeze onto corporate Britain. The meeting is down to “politics and optics”, said Vicky Pryce, chief economic adviser at the Centre for Economics and Business Research.

The pace of price rises has proved sticky at more than four times the official target for the past 14 months, putting in danger the British prime minister’s promise to cut inflation in half this year. Mr Sunak has steered clear of direct help to struggling consumers because of the risk of stoking prices further, and instead has urged companies to see what they can do.

The main reason he’s doing it is to be seen to be doing something,” said Ms Pryce. Mr Hunt “has very limited direct power to intervene, but he can encourage the regulators do their job properly”. The cast list for that meeting included the regulators for water, energy and telecommunications companies, Ofwat and Ofgem, and Ofcom. Also attending will be the Competition and Markets Authority and the Financial Conduct Authority. 

Politicians of all stripes have turned their attention in recent weeks to the price pressures facing consumers. Earlier this week, the cross-party Business and Trade Committee held a hearing in which they grilled supermarket executives on whether they’re profiteering from rampant inflation on groceries.

Ms Pryce said the British government could change the remit of the regulators and encourage them to be tougher on the companies they oversee; and it could also require certain industries to have voluntary or even mandatory agreements to keep prices lower. If a particular industry is deemed to be making excess profits, another option would be to impose windfall taxes, she said.

While the government does have tools it can use to bear down on inflation, they’re largely politically unpalatable options such as cutting benefits, raising taxes and boosting immigration.

As such, it’s ramped up the rhetoric suggesting companies could do more. Mr Hunt has told the House of Commons that banks are taking “too long” to pass on higher interest rates to savers. And Mr Sunak’s spokesman, Max Blain, has told reporters the premier expects “supermarkets and others to do everything possible to help people”. 

Bloomberg