Britons looking to cut back on their food bills amid the cost of living crisis are being hit with bigger price rises in discount chains than in their supermarket rivals, according to new data.
An average item now costs 31p more than it did 12 months ago in Iceland – a rise of 11 per cent – while Aldi prices have risen by 19p on average – a rise of 9.6 per cent.
The figures, from Trolley.co.uk’s Grocery Price Index, also show how three of the ‘Big Four’ supermarkets, Asda, Tesco and Morrisons, have kept average price rises down to around 3 per cent.
Sainsbury’s saw the smallest increase in the average cost of an item of the major supermarkets, with prices rising by 4p – a rise of 1.1 per cent – while Co-Op saw the smallest increase of 0.3 per cent.
Waitrose saw one of the largest monetary increases, with an average 22p rise per item over the last 12 months. However this represented a 4.4 per cent rise, due to Waitrose having a slightly higher price per item to begin with.
It comes as separate analysis by MailOnline shows how the average cost of a 20 item shopping basket is now £3 more than it was in May last year.
Perhaps even more worryingly, is that it is key staples including milk, butter and spaghetti that have seen some the biggest rises – with the popular pasta seeing an average 17 per cent rise in cost in the last 12 months.
Meanwhile, Tesco now has the most expensive 20 item basket of the UK’s big four supermarkets, coming in at £66.24 – up from £62.67 in May last year.
It comes as it was revealed how inflation – a measure of price changes over time – had soared to a 40-year high yesterday.
The headline CPI rate – a measure of all consumer goods and services purchased by households – rose to 9 per cent in April – up from 7 per cent in March. It is now the highest level since 1982.
And the Bank of England expects the rate will get even worse, peaking at 10.25 per cent during the final quarter of the year amid biggest squeeze on incomes since records began in the 1950s. That would be more than five times its 2 per cent target.
Earlier this week the bank’s chief issued an ‘apocalyptic’ warning about soaring food prices and said he felt ‘helpless’ in the fight against inflation as he told MPs the Ukraine war could yet deepen the cost-of-living crisis.
He also warned that a ‘very real income shock’ is coming this year as prices spiral at the fastest rate in 30 years and make millions of people poorer in real terms – and that surging inflation would hit household spending, causing unemployment to rise.
Tory ministers are now exploring a triple tax cut to ease the cost of living crisis, including helping homeowners with rising energy prices.
One of the main drivers of inflation, which is being seen in many parts of the world, including the EU and the US, has been spiraling natural gas and crude oil prices.
A sudden flux in world demand following the lifting of Covid restrictions in many countries has outstripped supply, causing a price rush across much of the world.
And Russia’s invasion of Ukraine has further compounded issues, because both Russia and Ukraine are larger supplier of grain and sunflower seeds to much of Europe – and supplies are being heavily disrupted.
Supermarket industry chiefs today told MailOnline that firms are ‘doing their bit’ to keep prices low but are facing rising costs, particularly in food production.
Figures show how Aldi and Iceland (pictured: Library image) have upped the cost of an average item in their shops by more than Tesco, Sainsbury’s, Asda and Morrisons in the last 12 months
An average item now costs 31p more than it did 12 months ago in Iceland, while in Aldi (pictured: Library image) prices have risen by 19p on average, according to figures from Trolley.co.uk
Tesco (pictured: Library image) now has the most expensive 20 item basket of the UK’s big four supermarkets, coming in at £66.24 – up from £62.67 in May last year
The website’s analysis of prices from more than 650 products sold at Iceland from May 2021 to May 2022 show how the average cost of an item is now £2.98 – up from £2.67 last year. Trolley.co.uk also analysed 2,204 products sold at German discount chain Aldi and found the average cost of an item had gone up from £1.97 to £2.16. The 19p rise is equal to a 9.6 per cent increase
Asda (11p per item), Tesco (10p per item) and Morrisons (12p per item), which had more than 12,000 products analysed, all saw similar average price rises of around 3 per cent, according to the website. Waitrose saw an average of 22p added to each item over the last 12 month, according to Trolley.co.uk, but as items were already more expensive in general this equaled a 4.7 per cent increase
The average price of an item at Morrisons rose by 12p, an increase of 3.2 per cent in the last 12 months. The smallest increases were at Co-Op and Sainsbury’s, according to the data. Lidl data is not available on Trolley.co.uk’s index
The average cost of an item increased at Asda increased by 11p, an increase of 3.1 per cent, between May 2021 and May 2022. The smallest increases were at Co-Op and Sainsbury’s, according to the data. Lidl data is not available on Trolley.co.uk’s index
It comes as figures from price tracking website Trolley.co.uk show how the largest average price rises across the UK’s major supermarkets have come at Iceland and Aldi.
How the average cost of a 20 item supermarket basket has increased in the past 12 months
Price in May 2021: £56.99
Price in May 2022: £60.53
Increase: £3.54 – Percentage increase: 6.2%
Price in May 2021: £62.67
Price in May 2022: £66.24
Increase: £3.57 – Percentage increase: 5.7%
Price in May 2021: £62.94
Price in May 2022: £64.69
Increase: £1.21 – Percentage increase 2.8%
Morrisons: Price in May 2021: £59.14
Price in May 2022: £62.10
Increase: £2.96 – Percentage increase: 5%
Co-Op: Price in May 2021: £62.34
Price in May 2022: £62.36
Increase: £0.02 – Percentage increase: >0.01%
*Figures are based on Trolley.co.uk data for the last 12 months and include 20 items selected by MailOnline, including bread, butter, eggs and milk, among other products. Aldi, Iceland and Waitrose could not be included in this analysis as a full list of products was not available at the time of publication
The website’s analysis of prices from more than 650 products sold at Iceland from May 2021 to May 2022 show how the average cost of an item is now £2.98 – up from £2.67 last year.
The 31p increase is an 11 per cent rise – above current inflation rates.
Trolley.co.uk also analysed 2,204 products sold at German discount chain Aldi and found the average cost of an item had gone up from £1.97 to £2.16. The 19p rise is equal to a 9.6 per cent increase.
Asda (11p per item), Tesco (10p per item) and Morrisons (12p per item), which had more than 12,000 products analysed, all saw similar average price rises of around 3 per cent, according to the website.
Waitrose saw an average of 22p added to each item over the last 12 month, according to Trolley.co.uk, but as items were already more expensive in general this equaled a 4.7 per cent increase.
The smallest increases were at Co-Op and Sainsbury’s, according to the data. Lidl data is not available on Trolley.co.uk’s index.
The average cost of an item at Co-Op rose 1p from £3.30 to £3.31 in the last 12 months, while Sainsbury’s saw a 4p increase, from £3.74 to £3.78.
The data by Trolley.co.uk is an average cost of an item in a supermarket. Larger supermarkets such as Tesco, Sainsbury’s, Asda and Morrisons have significantly more product lines than the likes of Aldi and Iceland – including more expensive items which are likely to increase the overall average.
It comes as analysis of Trolley.co.uk data by MailOnline shows how the average cost of a 20 item shopping basket across all supermarkets is now £3 more expensive than it was in May last year – a rise of 6.45 per cent.
The 20 items, selected by MailOnline, include essentials such as bread, milk and eggs, as well as washing powder, toothpaste, and commonly bought luxuries such as beer and wine.
Shoppers at Tesco have seen the biggest increase, with a basket now costing £3.57 more than it did 12 months ago.
The 5.7 per cent rise, which is below inflation, means a 20 item basket now costs £66.24, up from £62.67 in May last year.
Asda saw a bigger percentage rise, of 6.2 per cent, with a basket going up £3.54 from £56.99 to £60.53 in the last 12 months.
Morrisons saw the next biggest percentage rise, of 5 per cent, with the cost of a basket rising from £59.14 to £62.10 – an increase of £2.96.
Shoppers at Tesco have seen the biggest increase, with a basket now costing £3.57 more than it did 12 months ago. The 5.7 per cent rise, which is below inflation, means a 20 item basket now costs £66.24, up from £62.67 in May last year. Asda saw a bigger percentage rise, of 6.2 per cent, with a basket going up £3.54 from £56.99 to £60.53 in the last 12 months. Morrisons (pictured) saw the next biggest percentage rise, of 5 per cent, with the cost of a basket rising from £59.14 to £62.10 – an increase of £2.96
Sainsbury’s saw the smallest rise of the big four, with the cost of a basket rising 2.8 per cent, with the total increasing from £62.94 to £64.69 – a rise of £1.21.
How the average price of a 20 item basket of shopping has risen in the last 12 months
Milk: May 2021: £1.29 – May 2022: £1.47 – Increase: £0.18 – Percentage increase: 14%
Eggs: May 2021: £1.89 – May 2022: £2.04 – Increase: £0.15 – Percentage increase: 7.9%
Bread: May 2021: £1.10 – May 2022: £1.19 – Increase: £0.09 – Percentage increase: 8.2%
Toilet Roll: May 2021: £4.11 – May 2022: £4.57 – Increase: £0.46 – Percentage increase: 11.2%
Washing powder: May 2021: £5.84 – May 2022: £5.96 – Increase: £0.12 – Percentage increase: 2.1%
Fruit: May 2021: £1.70 – May 2022: £1.79 – Increase: £0.09 – Percentage increase: 5.3%
Toothpaste: May 2021: £3.02 – May 2022: £3.16 – Increase: £0.14 – Percentage increase: 4.6%
Cheese: May 2021: £2.41 – May 2022: £2.56 – Increase: £0.15 – Percentage increase: 6.2%
Bag of potatoes: May 2021: £1.36 – May 2022: £1.44 – Increase: £0.08 – Percentage increase: 5.9%
Beer: May 2021: May 2021: £6.71 – May 20221: £6.91 – Increase: £0.20 – Percentage increase: 3%
Shampoo: May 2021: £3.59 – May 2022: £3.62 – Increase: £0.03 – Percentage increase: 0.8%
Spaghetti: May 2021: £1.00 – May 2022: £1.16 – Increase: £0.16 – Percentage increase: 16%
Spreadable Butter: May 2021: £3.05 – May 2022: £3.43 – Increase: £0.38 – Percentage increase: 12.5%
Baked Beans: May 2021: £1.27 – May 2022: £1.39 – Increase: £0.12 – Percentage increase: 9.4%
Chicken Breast: May 2021: £4.03 – May 2022: £4.17 – Increase: £0.14 – Percentage increase: 3.5%
Tea Bags: May 2021: £2.97 – May 2022: £3.01 – Increase: £0.04 – Percentage increase: 1.3%
Ham: May 2021: £1.78 – May 2022: £1.89 – Increase: £0.11 – Percentage increase: 6.2%
Crisps: May 2021: £1.91 – May 2022: £2.00 – Increase: £0.09 – Percentage increase: 4.7%
Coffee: May 2021: £3.55 – May 2022: £3.72 – Increase: £0.17 – Percentage increase: 4.8%
White wine: May 2021: £7.10 – May 2022: £7.20 – Increase: £0.10 – Percentage increase: 1.4%
TOTAL: May 2021: £59.68 – May 2022: £62.68 – Increase: £3.00 – Percentage increase: 6.45%
*Figures based upon data from Trolley.co.uk
Co-Op saw the smallest increase, of just 2p in the last 12 months – a rise of less than 0.01 per cent. However the cost of a basket was still the third most expensive, behind Tesco and Sainsbury’s at £62.36.
Iceland, Aldi and Waitrose could not be included in the analysis because there was not a full set of data on each of the 20 items included in the basket.
Meanwhile, other analysis of Trolley.co.uk’s data shows how prices have risen on individual products in the 20 item basket.
Concerningly, the biggest cost rises, in terms of the average percentage increase across all supermarkets, have been in some of the most common essential items.
Spaghetti, a staple in most kitchen cupboards, saw a 16 per cent increase, going up on average from £1 to £1.16 in the last 12 months.
Spreadable butter was also one of the bigger risers, going up 38p from £3.05 to £3.43 on average since May last year – a rise of 12.5 per cent.
Other big risers include milk. On average a price of milk now costs £1.47, up from £1.29 in May last year – a rise of 14 per cent. The average including small and larger sizes, including 3 Pint cartons, as well as more expensive brands.
Toilet rolls are now 46p more expensive on average than they were last year – a rise of 11.2 per cent – while bread now costs on average £1.19, 9p more than it did in May 2021, according to the figures.
Cheese, potatoes, ham and bags of fruit are also, on average, around 6 per cent more expensive than last year, while can of baked beans have risen by around 12p.
Surprisingly, some of the smallest increases have been in wine and beer. The average bottle of white wine now costs £7.20 in UK supermarkets, up 10p (1.4 per cent) from last year, while packs of beer on average cost £6.91, up 20p (3 per cent) from May 2021. The average for beer includes four packs and much larger packs, including crates of 20.
Commenting on the figures, Saeed Ibrahim, from Trolley.co.uk, said: ‘Looking at the last few months, it’s clear prices are continuously increasing across these staples (with some of the sharpest rises occurring over the last couple of months).
‘Unfortunately, this could very well mean that this trend will continue into the future.
‘I fear for how devastating the effects of this could be on those of us who are already in need of financial support.
‘I would suggest that shoppers begin looking at where their weekly shop has increased the most in price and consider switching to cheaper or own brand alternatives where possible.’
Meanwhile, the British Retail Consortium, a group which represents the interests of retail firms, including supermarkets, said retailers were ‘doing their bit’ to keep prices low but were facing rising costs, particularly in food production.
Helen Dickinson, Chief Executive of the British Retail Consortium, said: ‘Inflationary pressures continue to impact businesses as well as households, with soaring energy prices further driving up the Consumer Price Index.
‘These higher energy prices, along with a tight labour market, and the huge costs of moving goods around, are impacting all retailers.
‘Food production has been particularly hard hit, with historically high global food prices, rising costs of animal feed, and disruption in supplies as a result of the Ukraine war.
Cheese, potatoes, ham and bags of fruit are also, on average, around 6 per cent more expensive than last year, while can of baked beans have risen by around 12p. Pictured: A library image of a person carrying a shopping basket in Tesco
‘The Bank of England now expects inflation to top 10% by the end of the year, as many of the rising costs filter down into prices.
So what IS driving the UK’s spiralling inflation?
Prices are rising by 7 per cent a year in the UK – the highest rate for 30 years and The Bank of England has warned inflation might reach 10 per cent within months.
By far the biggest contributor has been the huge spike in wholesale crude oil and natural gas prices.
Demand, sparked by the economic recovery following COVID-19 shutdowns, has outstripped supply, driving up prices.
And Russia’s invasion of Ukraine has only exacerbated the problems. Russia is Europe’s largest supplier of gas and earlier this year Vladimir Putin, in response to sanctions over his invasion of Ukraine, demanded some European countries pay for Russian gas in roubles.
A direct consequence of spiraling fuel prices is an increase in petrol prices, with average petrol prices rising by 12.6p per litre between February and March – the largest monthly rise since records began in 1990.
But it has also led to an increase in transport costs for food firms and supermarkets, driving up costs there as well. Ukraine is also a producer of a large amount of food, including wheat and sunflower seeds. Disrupted supplies have again raised prices.
On top of that, a spike in the cost of natural gas has seen energy prices rise for homes and businesses. Earlier this year Ofgem increased the price cap for the average costs of almost £700-a-year – and it could rise even more in October when the cap is reviewed again.
VAT has also gone up for some businesses. The government reduced VAT for hospitality and tourism firms during the pandemic, but on April 1 it returned to the standard 20 per cent rate.
Britain isn’t alone however in its battle with inflation. Brexit has had an impact, particularly in terms of staffing, leading companies to increase wages – and ultimately costs – to compete for a smaller pool of workers.
But UK inflation has been broadly in line with the EU average for the last year. And while figures from the ONS last month put the UK above France and Germany in terms of inflation, the UK remained in line with the EU average.
Meanwhile, inflation in the US in December, the last figure reported by the ONS, was at 8.1 per cent, higher than the 5.4 per cent UK inflation at the time.
‘Retailers are doing their bit to protect consumers by expanding their value ranges and doing all they can to keep the price of essentials down.
‘This can be seen in the BRC’s Shop Price Index, which tracks the price of basic goods, which showed a slower rise in the price of essential foods and other products than the inflation levels seen in the broader CPI measure.’
It comes as separate data released by The Office for National Statistics (ONS) showed how the prices of butter, sugar and milk have surged by 11.8 per cent, 12.2 per cent and 13.2 per cent respectively.
The ONS revealed that inflation hit 9 per cent in the year to April yesterday, measured by the Consumer Prices Index (CPI).
This is thought to be the highest figure for 40 years.
Most of the rise was due to the 54 per cent hike in the energy price cap, but prices on all but two of the more than 80 items that the ONS tracks have risen over the past year.
According to Retail Price Index figures – which are slightly different to the CPI – potatoes were one of the very few household grocery staples to drop in price over the year to April – down 1.2 per cent.
But overall food prices rose 6.8 per cent, with meats, oils and some animal products especially hit.
The rise across meat categories was clear: lamb was the worst hit, up 14.2 per cent, followed by poultry (10.4) and beef (9.8) while pork got off with a lighter 4.9 rise.
Butter prices rose 11.8 per cent and the price of oils and other fats soared 18.2 per cent over the last year after fears of a shortage sparked by the war in Ukraine – which is a major producer of sunflower oil.
Away from food, households were also hit by an 8.1 per cent extra price on their restaurant bills, while the price of takeaways and snacks rose 6.5 per cent.
Premier Foods – which also owns brands such as Oxo cubes, Sharwoods and Ambrosia – today said the Ukraine war was pushing up prices of many of its ingredients, including wheat and dairy, while fuel and energy costs are also rocketing.
Its boss Alex Whitehouse said the group raised prices after seeing a ‘high single digits’ increase in costs in its year to April and is expecting to ramp them up again as it braces for a further ‘low double-digit’ rise in costs over the year ahead.
He said the rises would be spread across its brands, though it is also launching cost efficiency programmes to try and tackle surging inflation.
Mr Whitehouse said: ‘Food inflation is pretty significant and for some families that’s going to be really tough.’
He pledged the group would ‘work really hard to offset as much of the inflation pressures as we can and help people as best we can by trying to keep prices down’.
Newly-modelled figures from the ONS show that CPI would have last been above the April 2022 level of 9 per cent in March 1982 – when it was 9.1 per cent
Sharp increases in energy and other household bills have been driving the recent spike in inflation
Cost of grocery staples: Oil surges by 18% after Ukraine war with only potatoes now cheaper
Biscuits and cakes 11.0%
Other meat 7.1%
Oil and fats 18.2%
Fresh milk 13.2%
Soft drinks 6.5%
Sweets & chocolates 0.7%
Fresh vegetables 2.6%
Fresh fruit 4.7%
Other foods 8.1%
UK Retail Prices Index, as of April 2022, over past year
Details of the price hike plans follow results showing the group’s pre-tax profits jumped 16.4 per cent to a higher than expected £102.6 million in the year to April 2.
Premier Foods said its Mr Kipling cake brand enjoyed its best year ever in 2021, helping the overall sweet treats category enjoy a 7 per cent rise in revenues.
The firm announced a 20 per cent rise in its shareholder dividend payout on the back of the bumper results, helping shares rise 6 per cent in morning trading today.
Bank of England Governor Andrew Bailey warned earlier this week that ‘apocalyptic’ food prices could be disastrous for the world’s poor.
Energy prices are also feeding into the rising food costs – farmers and food factories need gas, petrol and electricity to run their businesses and have to pass these costs onto customers.
This is also the case for many other products.
Drinking at a pub got more expensive too, with the cost of beer up 4.9 per cent and wine rising 6.2 per cent. Alcohol prices increased less rapidly in off licences and supermarkets.
Food and Drink Federation chief executive Karen Betts said that the figures are slightly worse than food manufacturers had feared.
‘This is a very worrying time for many households, and food and drink businesses are continuing to do everything they can to contain food-price inflation,’ she said.
‘Ingredient price rises have been relentless for more than a year now, as a result of pressures in the global supply chain caused by the Covid-19 pandemic.
‘The war in Ukraine, with both Ukraine and Russia important suppliers of commodities like wheat and food oils, as well as energy and fertiliser, has made the situation worse.’
Tories’ triple tax cut boost: Ministers plan to help three million of the lowest paid, offer relief on energy bills and ease burden on business to stave off recession – as inflation hits 40-year high of 9%
By Jason Groves, Political Editor for the Daily Mail
A triple tax cut to ease the cost of living crisis is being examined by ministers.
Rishi Sunak is already drawing up plans for a major package to help with energy bills in July, potentially by cutting council tax.
But last night the Chancellor told business leaders he would cut their taxes in the autumn to prompt the investment needed to head off a recession. And a government source also said Boris Johnson was considering an emergency tax cut for poorer families this summer.
One option under examination is a change to Universal Credit rules to let three million workers keep more of their earnings.
The moves came as official figures showed inflation jumped to 9 per cent in April, the highest level in 40 years.
And Jonathan Ashworth, Labour’s shadow secretary of state for work and pensions, warned Britons were facing a ‘cost-of-living tsunami’, with real wages now almost £300 lower than they were 15 years ago.
‘By refusing to take action on the cost of living through an emergency budget, Rishi Sunak has shown once again the Tories simply aren’t on the side of working people,’ he added.
Mr Sunak warned that he could not ‘protect people completely’ from the cost of living squeeze. ‘There is no measure any government could take, no law we could pass, that can make these global forces disappear overnight,’ he told CBI business leaders.
‘The next few months will be tough. But where we can act, we will.’
A triple tax cut to ease the cost of living crisis is being examined by ministers as Rishi Sunak already drawing up plans for a major package to help with energy bills in July. The Chancellor pictured speaking at the Confederation of British Industry’s annual dinner in London on Wednesday
Inflation yesterday reached 9%, heights it has not seen since March 1982
Mr Johnson acknowledged that households were ‘struggling’ with inflation and pledged that ministers would ‘look at all the measures we need to take to get people through to the other side’.
Chairman of the education select committee, Robert Halfon, told BBC Essex: ‘Most of the messages I get when I’m out and about are people struggling with the cost of living. There’s a tsunami coming. Energy bills are going up to £2,000 a year. That is just unaffordable.’
What could Rishi do about the cost-of-living crisis?
A windfall tax
Labour has been calling for a one-off windfall tax on the inflated profits of energy firms for months, saying it could raise more than £2billion.
That money could pay for measures to lower people’s bills, although by definition the revenue would be a single sum – meaning a permanent cut to costs would need other funding.
Ministers initially dismissed the prospect of a windfall tax, warning it would hit investment in the UK, oil firms already pay high taxes, and imposing ad hoc extra charges is wrong in principle.
However, the Chancellor has put the option back on the table as pressure grows for more spending.
Axe 5% VAT on domestic energy bills
This has been mooted by Opposition parties, and would cost the government an estimated £1.7billion.
But critics say the move would not be well targeted at the poorest families, as wealthier households would save more in cash terms because they have larger homes to heat.
Boost the £150 council tax rebate
The warm home discount will give three million of England and Wales’s poorest homes £150 off their bills from October.
However, Treasury officials have also drawn up plans for increasing the one-time boost to £300, £500 or possibly even £600.
This is likely to appeal to Mr Sunak because it targets those most in need reasonably effectively, and is unlikely to become a permanent on the stretched finances.
Cut taxes faster
The clamour from many Tory MPs and ministers is for Mr Sunak to respond to the crisis with broad tax cuts.
They argue that letting people keep more of their money would help boost the economy as well as tackling the squeeze on incomes.
However, bringing forward the 1p cut to the basic rate scheduled for 2024 could play havoc with Mr Sunak’s delicate budgetary calculations.
Tory MPs yesterday lined up to call for immediate tax cuts and former Cabinet minister Jake Berry said it was ‘now or never’. He added: ‘It’s all very well to talk about budgetary measures in November but this cost of living crisis isn’t sticking to a neat parliamentary timetable – urgency is required.’
Mr Berry’s warning came as:
- Liz Truss led Cabinet calls for tax cuts, saying a ‘low-tax economy’ was the best way to boost growth;
- The British Chambers of Commerce warned of a ‘real chance’ of recession;
- Ministers prepared to cap interest charges on student loans amid fears rates could hit 12 per cent;
- Mr Johnson again refused to rule out a windfall tax on energy giants, as Labour accused him of sitting on the fence;
- Economists warned that low-income households, including many pensioners, already faced double-digit inflation;
- Average petrol prices hit an all-time record of almost £1.68 a litre.
Treasury sources yesterday confirmed that the Chancellor was drawing up plans for a major package to help families cope with soaring energy bills this summer.
Ministers have been warned that the energy price cap could jump by anything from £500 to £1,000 when the regulator Ofgem makes its next assessment in August.
This could push average bills up from the current £1,971 to almost £2,500 or even £3,000 in the autumn when the new price cap takes effect.
Mr Sunak is expected to pre-empt the rise by unveiling a package of support before MPs break for the summer in July. Options being considered include: a repeat of the £200 ‘rebate’ pledged by the Chancellor in February; a further cut to council tax for people living in homes in bands A to D; an increase in the Winter Fuel Allowance received by pensioners; and a rise in the Warm Home Discount Scheme.
Sources said that ministers had not yet decided which of the options to pursue.
The Treasury has ruled out calls from Labour and some Conservative MPs for a full-blown ’emergency budget’ this summer.
During clashes in the Commons, Labour leader Sir Keir Starmer said the Prime Minister ‘just doesn’t get it’.
He added: ‘He doesn’t actually understand what working families are going through in this country. They are struggling with how they are going to pay their bills.’
But a government source told the Daily Mail that Mr Johnson was considering announcing a single major tax cut this summer to provide immediate help.
The source added: ‘There is a view that it is just not tenable to leave everything until the autumn. Yes, there’s going to be more help on energy, but it’s probably more likely than not that we will also have to do something on tax this summer.’
But Tory MPs yesterday stepped up pressure on the Chancellor to move faster and further in easing the record tax burden and Scottish Secretary Alister Jack called for immediate action.
He said: ‘What more I’d like to see done is a further tax cut because that’s how you get money into people’s pockets.’
Tory backbencher Sir Bernard Jenkin said the Treasury was still adopting ‘peacetime thinking’ despite the fact the country was facing a crisis.
Tory MPs yesterday lined up to call for immediate tax cuts and former Cabinet minister Jake Berry said it was ‘now or never’. He added: ‘It’s all very well to talk about budgetary measures in November but this cost of living crisis isn’t sticking to a neat parliamentary timetable – urgency is required.’ PM Boris Johnson pictured in the Commons on Wednesday
‘The warning lights are flashing red’: Britain teeters on the brink of recession after inflation soars to 40-YEAR high with ‘apocalyptic’ food costs looming – as Rishi says he WILL cut taxes in Autumn Budget… but for businesses
by JAMES TAPSFIELD, Political Editor, for MailOnline
How inflation threatens families and the public finances
Inflation has long been seen as one of the biggest threats to economies.
In extreme examples, it has spiralled out of control and sparked panic.
The German Weimar Republic effectively collapsed after the value of the mark went from around 90 marks to the US dollar in 1921 to 7,400 marks to the dollar in 1921.
In Zimbabwe between 2008 and 2009 the monthly inflation rate was estimated to have reached a mind-boggling 79.6billion per cent.
Although inflation has faded in the minds of Britons who have become used to ultra-low interest rates and stable prices, it caused chaos here in the 1970s.
Deregulation of the mortgage market, the emergence of credit cards and an overheating economy drove the rate to an eye-watering 25 per cent in 1975.
People would rush to buy goods with their wages after pay-day, as the costs were rising so quickly.
Strikes erupted as there was pressure for pay packets to keep pace with prices.
Unemployment rose as the economy tipped into recession, and the government had to pump up interest rates in a bid to bolster the pound and control the surge.
That meant mortgage interest payments spiked into double digits.
And as a result servicing the national debt became a serious problem.
Rishi Sunak is promising tax cuts after inflation soared to an eye-watering 40-year high with fears things are set to get even worse – but made clear they are being targeted at business.
The Chancellor hinted at his plans for the Autumn Budget in a speech to the CBI yesterday evening, hours after it emerged the headline CPI rate rose to 9 per cent in April.
That was up from 7 per cent in March and a peak since 1982, when Margaret Thatcher was PM, the Falklands War was about to start, and unemployment was running at three million.
The Bank of England expects the annual rate will get even worse, peaking at 10.25 per cent during the final quarter of the year amid the biggest squeeze on incomes since records began in the 1950s. That would be more than five times its 2 per cent target.
Experts said ‘this is what Stagflation looks like’, while ministers were urged to recognise that the ‘warning lights are flashing red’ with the UK economy teetering towards recession after the pandemic and Ukraine war.
Analysts said another interest rate hike next month is now ‘inevitable’, potentially to 1.25 per cent, as the Bank of England scrambles to stop prices spiralling out of control. But the Pound still dipped further against the US dollar as investors priced in the increasingly grim situation.
In his speech to business leaders Wednesday evening, Mr Sunak said that cutting costs for families is ‘our role in government’, but instead of announcing any more direct help for individuals, he told bosses: ‘We need you to invest more, train more, and innovate more.
‘In the autumn Budget we will cut your taxes to encourage you to do all those things. That is the path to higher productivity, higher living standards, and a more prosperous and secure future.’
The proposed changes are believed to relate to investment tax breaks, rather than corporation tax cuts.
Rishi Sunak told businesses: ‘Further government action can only take us so far. We need you – the wealth creators, the entrepreneurs, the leaders.
‘We need you to invest more, train more, and innovate more.
‘And as I’ve said previously, our firm plan is to reduce and reform your taxes to encourage you to do all those things.
‘That is the path to higher productivity, higher living standards, and a more prosperous and secure future.’
At PMQs this afternoon, Mr Johnson blustered as he was grilled by Keir Starmer over whether he will bring in a levy on profits of oil and gas firms – amid signs of splits in the Cabinet on the idea.
Instead he said ‘this Government is not in principle in favour of higher taxation’ and the government would ‘look at all the measures that we need to take to get people through to the other side’.
Mr Johnson highlighted the huge UK investments being made by such companies, and argued they were already highly taxed. But No10 effectively issued a threat by saying the government wanted them to pump more money into infrastructure.
Opposition parties are urging an emergency Budget to slash VAT and help struggling Britons who are ‘on the brink’.
But there are mounting signs of splits in Cabinet over how to respond, with Foreign Secretary Liz Truss suggesting more tax cuts are needed and slating the idea of a windfall tax on energy firms – something Mr Sunak has said he is seriously considering.
Boris Johnson was flanked by Rishi Sunak at PMQs today as he clashed with political opponents over the cost-of-living crisis
Newly-modelled figures from the ONS show that CPI would have last been above the April 2022 level of 9 per cent in March 1982 – when it was 9.1 per cent
Labour also attacked Mr Sunak for failing to take part in a debate on the economic part of the Queen’s Speech, opposite shadow chancellor Rachel Reeves.
A Labour source accused ‘vanishing Rishi’ of being unwilling to ‘turn up and face up to the truth about the cost of living crisis’.
‘He running scared from the reality – that he’s a high tax, low growth Chancellor who is completely out of touch,’ they added.
Threadneedle Street governor Andrew Bailey infuriated ministers earlier this week when he delivered an extraordinary warning that ‘apocalyptic’ food price rises are in the pipeline.
He admitted that the Bank is largely ‘helpless’ to prevent the ‘very real income shock’ and unemployment will rise.
The unrelentingly miserable news continued with pump prices reaching new records, of 167.64p for petrol and 180.88p for diesel.
In a further headache for ministers, the RPI measure of inflation has rocketed even higher to 11.1 per cent in April – with unions threatening strikes unless that is used as the basis for pay rises in the public sector.
Mr Johnson frantically dodged at PMQs this afternoon as he was grilled by Keir Starmer (pictured) over whether he will bring in a windfall tax on energy firms’ profits – amid signs of splits in the Cabinet on the idea
Sharp increases in energy and other household bills have been driving the recent spike in inflation
The Bank of England has predicted that inflation will keep rising and hit 10.25 per cent by the end of the year – before falling back again
At a bruising PMQs, Sir Keir urged Mr Johnson to stop the ‘hokey-cokey’ and do an ‘inevitable U-turn’ on the windfall tax.
The Labour leader said: ‘Last week, he said ‘we will have a look at it’. Yesterday, he voted against it. Anyone picking up the papers today would think they are for it. And now he says he is against it again. Clear as mud.
‘To be fair, it’s not like the rest of his Cabinet know what they think either. The same day the Chancellor said it was something he was looking at, the Justice Secretary said it would be disastrous.
‘The Business Secretary called it a bad idea. But also said he would consider a Spanish-style windfall tax. One minute they’re ruling it in. The next, they are ruling it out. When will he stop the hokey-cokey and just back Labour’s plan for a windfall tax to cut household bills?’
Mr Johnson replied: ‘This country and the world faces problems in the cost of energy driven partly by Covid and partly by (Vladimir) Putin’s war of choice in Ukraine. And we know, we always knew that there will be a a short-term cost in weaning ourselves off Putin’s hydrocarbons, and in sanctioning the Russian economy.
‘Everybody in this House voted for those sanctions. We knew that it would be tough, but I just want to tell the right honourable gentleman that giving in, not sticking the course would ultimately be that far greater economic risk.’
He added: ‘We will look at measures, we will look at all the measures that we need to take, to get people through to the other side but the only reason we can do that is because we took the tough decisions that were necessary during the pandemic, which would not have been possible if we listened to him.’
Mr Johnson accused Sir Keir of having a ‘lust to raise taxes’.
On the windfall tax he said: ‘We don’t relish it, we don’t want to do it, of course we don’t want to do it, we believe in jobs and we believe in investment and we believe in growth.
‘As it happens, the oil companies concerned are on track to invest about £70billion into our economy over the next few years, they’re already taxed at a rate of 40 per cent.’
Mr Johnson added: ‘Of course we will look at all sensible measures but we will be driven by considerations of growth, investment and employment.’
After the exchanges, Downing Street urged oil and gas companies to ‘go further’ in investing profits amid growing calls for the Government to impose a windfall tax.
The PM’s official spokesman said: ‘We do want them to go further, recognising they’ve already put billions of pounds into renewable energy, but as yet we have not set a timeline.’
However, Foreign Secretary Liz Truss took a much more negative stance on a levy in a round of interviews this morning.
She cautioned that the move would make it ‘difficult to attract future investment into our country’.
Mr Sunak said in a statement after the figures this morning: ‘Today’s inflation numbers are driven by the energy price cap rise in April, which in turn is driven by higher global energy prices.
‘We cannot protect people completely from these global challenges but are providing significant support where we can, and stand ready to take further action.
‘We’re saving the average worker £330 a year through reducing National Insurance Contributions, changing Universal Credit to save over a million families around £1,000 a year, and providing millions of families with £350 each this year to help with their energy bills.’