Chancellor claims halving inflation means a 5p boost to real disposable incomes

Jeremy Hunt said on 2 October 2023 that meeting the government's pledge to halve inflation was "not a 1p tax cut, [but] a 5p boost in their real disposable incomes"¹. He made the remark on BBC Radio 4's Today programme and repeated the "5p boost" claim in his speech to the Conservative party conference¹. The day before, on Sunday with Laura Kuenssberg, Prime Minister Rishi Sunak had described halving inflation as "the best tax cut that I can deliver for the British people right now"¹.

The government's target was to halve inflation from around 10% to around 5% by the end of 2023¹. Full Fact, which published its assessment on 4 October 2023, said the chancellor's claim is "only correct if comparing people's disposable income to what they would have had had the rate of inflation remained the same"¹. It set out the arithmetic: if inflation is at 5%, prices are still rising, so an item that cost £1 last year would cost 5p more, not 5p less¹. Prices falling would require negative inflation, which the UK last saw in 2015¹.

Full Fact also examined Sunak's separate claim that inflation is a tax. It said inflation "is not a form of taxation" but a measure of how fast the prices of goods and services are rising or falling, while noting that inflation and tax can both affect disposable income¹. Sunak had said: "Inflation is a tax, it is a tax that impacts the poorest people the most"¹.

Full Fact said it had asked the Treasury about Hunt's comments. When the comparison was made the previous month, a spokesperson told Full Fact the statement was not misleading and that "prolonged high inflation means shop prices rising faster, so halving inflation is the best way to make household incomes go further"¹. Full Fact added that overall inflation had fallen over the year so far, but that the price of some things, "perhaps most notably food", continued to rise considerably faster than the headline rate¹.

Why it matters for households

The distinction turns on what is being compared. A fall in the rate of inflation from around 10% to around 5% means prices are rising more slowly than they otherwise would have, not that they are coming down¹. On the chancellor's framing, the gain is measured against the income households would have had if inflation had stayed at 10%¹. On the prices themselves, a 5% rate still means a £1 item from a year earlier costs about 5p more¹.

The effect is not evenly spread. Food prices were rising at a considerably faster rate than the headline measure, according to Full Fact¹. The claims were made at the Conservative party conference, and Full Fact said it had received a number of questions from readers about them, adding that the impact of falling inflation is often misunderstood¹.

What happens next

The government's stated aim was to halve inflation from around 10% to around 5% by the end of 2023¹. Full Fact said it had asked the Treasury about Hunt's comments and that a Treasury spokesperson had previously responded on the same comparison¹. No further response from the Treasury was reported.