Pragmatic Prime Minister is needed to navigate recession

THERE'S a high chance that the first task of either Liz Truss or Rishi Sunak as Prime Minister will be to navigate the economy through a recession. That will require them to relinquish their dogmatic approaches to tax and adopt more practical policies to minimise the damage.

- Paul Dales

CPI inflation was at a 40-year high of 9.4% in June and will probably increase to at least 12.0% in October when the Ofgem utility price cap is raised again.

The latest evidence suggests that a 60% increase is on the cards. That would raise the average utility bill on October 1 to £3150 a year, meaning that it is £1200 higher than now and almost £1900 higher than a year ago.

That easily outstrips the possible £1500 increase in the average wage over the same period. And after taking into account the rises in the prices of other items as well as all taxes and government handouts, household incomes may decline by 3% this year and by 2% next year. Never before has real household disposable income declined by 2% in one calendar year, no matter two in a row. So high inflation is going to deliver an almighty hit to households' real spending power.