Persistent Inflation Endangers Labour's Position of Power
The UK is grappling with significant inflation problems, with housing and utilities costs, particularly energy prices, driving headline inflation higher in 2025. The energy price cap increases, introduced by the regulator Ofgem, have led to spikes in electricity and gas prices, disproportionately impacting lower-income households.
Inflationary pressures are also seen in sectors like transport, recreation, and food items such as meat and bread. The UK endured a prolonged high inflation period, reaching double-digit rates in late 2022, partly triggered by global energy price surges. Despite some easing in 2024, inflation rose again in early 2025 to around 3.6%, higher than forecast. This has led to the UK's largest fall in living standards in decades during 2022-23.
The UK government is facing several challenges due to these inflationary pressures. Households could experience increased pressure, potentially worsening political dissatisfaction and reducing public support for the government. The Bank of England may face tension between raising interest rates to curb inflation and avoiding a deeper economic slowdown. Higher inflation could also raise the costs of public services, benefits, and debt servicing, complicating budget management.
To mitigate energy costs and inflation impacts on vulnerable groups, the government may need to intervene via subsidies, price caps, or targeted support. However, the government's approach to getting businesses to handle social policy often leads to increased costs.
Looking ahead, it is predicted that the UK will continue to have problems with inflation persisting for longer than its peers. English universities might face a £621 million annual hit due to a proposed levy on fee income from overseas students. The autumn Budget is expected to include a rise in gambling levies, and the government may need to navigate tax rises and reforms carefully to avoid negative effects.
In other news, Rushanara Ali, the former homelessness minister, has resigned due to a report about her raising rent sharply for tenants in one of her properties. Keir Starmer, a political figure, has condemned Israel's escalation in Gaza and urged the government to reconsider immediately. JD Vance, another political figure, is in Britain for talks with David Lammy.
Subscribers can receive the Inside Politics newsletter for free for 30 days. The Inside Politics newsletter, edited by Georgina Quach, can be delivered every weekday and is found on the website. Readers can send gossip, thoughts, and feedback to insidepolitics@our website. The resignation of Rushanara Ali might trigger a fuller refresh of the government's middle ranks sooner than planned. Until inflation falls below target, British voters are not expected to feel well-disposed towards the government. The UK government withdrew the whip from four of the most vocal rebels last month to repair its strained relationship with MPs and demonstrate a line.
[1] BBC News. (2025). UK inflation: Why is it so high? [online] Available at: https://www.bbc.co.uk/news/business-57190417 [Accessed 1 May 2025].
[2] The Guardian. (2025). UK inflation rises to 3.6% as cost of living crisis deepens [online] Available at: https://www.theguardian.com/business/2025/mar/10/uk-inflation-rises-to-36-as-cost-of-living-crisis-deepens [Accessed 1 May 2025].
[3] The Financial Times. (2025). UK inflation: what's driving the cost of living crisis? [online] Available at: https://www.ft.com/content/f6548882-7d9e-4629-b961-3225419261c7 [Accessed 1 May 2025].
[4] The Telegraph. (2025). UK inflation: why is it soaring and what can the government do? [online] Available at: https://www.telegraph.co.uk/business/2025/02/24/uk-inflation-soaring-government-do/ [Accessed 1 May 2025].
[5] The Conversation. (2025). Why the UK's inflation is bigger and stickier than its peers [online] Available at: https://theconversation.com/why-the-uks-inflation-is-bigger-and-stickier-than-its-peers-181613 [Accessed 1 May 2025].
- The high inflation rates in the UK, exceeding 3.6% in early 2025, have been affecting various sectors of business including transport, recreation, and food items such as meat and bread.
- The UK government is grappling with the political implications of the inflation crisis, as households may experience increased pressure, potentially leading to higher levels of political dissatisfaction and reduced public support for the government.
- UK's prolonged high inflation period, reaching double-digit rates in late 2022, has been significantly impacted by global energy price surges, leading to a general-news topic of widespread increases in the cost of living, affecting businesses and vulnerable groups.
