Government should take the lead in tackling cost of living

London, 5 May 2022

Responding to the Bank of England’s decision to increase the Bank Rate by 0.25 percentage points, to 1%, research and campaign group Positive Money has called for the government to take the lead in tackling the cost of living crisis.

Fran Boait, executive director of Positive Money, said: 

“The Bank of England raising interest rates is essentially virtue signalling. It knows that higher interest rates will do nothing to lower price rises driven by supply issues and corporate profiteering, but it has to be seen to do something because of its mandate for inflation. With the Bank forecasting a recession, higher interest rates will just choke off the recovery and make the cost of living crisis worse for households, by adding to borrowing costs and making it harder for workers to secure pay rises.

“The Bank of England warns that inflation is going to be driven even higher if the energy price cap is raised again in October – but this is ultimately something the government could prevent. It is time to stop relying on monetary policy to do all the work – governments must step up and tackle the root causes of higher prices while giving more financial support to households to get through the coming months.” 

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Notes: 

1. At its meeting ending on 4 May 2022, the MPC voted by a majority of 6-3 to increase Bank Rate by 0.25 percentage points, to 1%: https://www.bankofengland.co.uk/monetary-policy-summary-and-minutes/2022/may-2022 

2. MPC on price caps: “If sustained, higher gas and electricity futures prices would mean that the price caps could be around 40% higher, adding a further 1½ percentage points to CPI inflation from October.” https://www.bankofengland.co.uk/monetary-policy-summary-and-minutes/2022/may-2022 

3. Positive Money is a research and campaign organisation working towards a money and banking system which supports a fair, democratic and sustainable economy. Set up in the aftermath of the financial crisis, Positive Money is a not-for-profit company funded by charitable trusts and foundations, as well as small donations from its network of over 65,000 supporters. www.positivemoney.org.

4. For more information from Positive Money or to arrange a briefing/interview with a spokesperson, please contact press@positivemoney.org.uk or Anna Pick on 07948802104.