Pressure grows on next prime minister to act on rising inflation

The next prime minister needs to “get their house in order” and focus on tackling inflation, a business group said as the cost-of-living crisis deepened.

With a new prime minister set to replace Boris Johnson in September, the British Chambers of Commerce (BCC) said it was vital for the Government to demonstrate that “despite political upheaval” it can still manage the economy.

Opponents of Mr Johnson claimed he was leading a “zombie government” at a time of national crisis. The Tory leadership race will continue throughout the summer, with the Prime Minister remaining in office until his successor is elected.

Chancellor Nadhim Zahawi insisted “we are working alongside the Bank of England to bear down on inflation” and acknowledged the difficulties being caused by rising prices.

Official data showed that Consumer Prices Index (CPI) inflation rose to 9.4% in June, up from 9.1% in May and remaining at the highest level since February 1982.

BCC Director of Policy and Public Affairs, Alex Veitch, commented: “It is vital that Government sends business a clear signal that despite political upheaval it can still take action on the economy.

“Beginning a long-promised review of the shortage occupations list to ease the incredibly tight labour market would be a start. The autumn budget must then be the main priority of the new prime minister and chancellor – a chance for them to reset, rethink and get their house in order.

“This inflationary surge sits alongside a poor economic outlook and unless the Government acts with urgency the chances of a recession will only increase.”

Shadow Chancellor Rachel Reeves said the Tory leadership race had delivered “chaos, distraction and unfunded fantasy economics”.

“Rising inflation may be pushing family finances to the brink, but the low wage spiral facing so many in Britain isn’t new,” she said.

“It’s the result of a decade of Tory mismanagement of our economy meaning living standards and real wages have failed to grow. We need more than sticking plasters to get us back on course – we need a stronger, and more secure economy.”

There have been widespread reports of a rift between the Government and the Bank of England over tackling inflation.

Foreign Secretary and Tory leadership contender Liz Truss has criticised the Bank’s monetary policy and suggested she would “look again” at its mandate to make sure it is tough enough on inflation.

Bank of England governor Andrew Bailey has suggested a 50 basis percentage point rise in the interest rate – which would take it from 1.25% to 1.75% – will be one of the options on the table as it looks to “act forcefully” on inflation.

Chief Secretary to the Treasury Simon Clarke, a Truss supporter, has denied suggestions that he or the Government have been putting pressure on the Bank of England.