Rishi Sunak says he'll 'hold nerve' on tackling inflation despite interest rate pain

British Prime Minister resisting pay demands he insists will only make things worse

Rishi Sunak speaks during a PM Connect event at the IKEA distribution centre in Dartford, Kent on Thursday. AFP
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Rishi Sunak has insisted his government will “hold our nerve” to tackle inflation and backed interest rate increases despite the effect on homeowners.

The Prime Minister said “inflation is the enemy” and gave his support to the Bank of England’s decision to raise interest rates to a 15-year high last week.

The central bank issued its 13th interest rate hike in a row, this time by half a percentage point from 4.5 per cent to 5 per cent in the sharpest increase since February, amid predictions rates could hit 6 per cent.

Mr Sunak said he would not cave in to demands to increase public sector pay or step in with direct financial support to help homeowners cope with mortgage rate rises, which he said would only make inflation worse.

Inflation remains stubbornly high at 8.7 per cent, unchanged from April’s reading, delivering bad news for Britons desperate for some respite from runaway price rises.

"We’ve got to hold our nerve, stick to the plan and we will get through this,” he said in an interview with the BBC.

“The Bank of England is doing the right thing. The Bank of England has my support. Inflation is the enemy.”

It was put to the Prime Minister that many people who are feeling the squeeze from higher mortgage rates and inflation might think he’s living in a “parallel universe”.

In response he maintained “I’ve never said it’s not challenging and this is not a difficult time to get through”.

“But I want to give people the reassurance and confidence", he said, adding: "we’ve got a plan, the plan will work and we will get through this."

“I have to take what are difficult and often not popular decisions, but they’re the right long-term decisions for the country. I am not going to shy away from that.”

Meanwhile, the Chief Secretary to the Treasury, John Glen, indicated the government could reject independent review bodies' recommendations on public sector pay.

Junior doctors in England are to stage a five-day strike next month in a dispute with the UK government over pay and staffing, the longest single period of industrial action in the history of the National Health Service.

Mr Glen told Sky News's Sophy Ridge On Sunday show that ministers were aware of "the implications for inflation" when deciding whether workers should get pay rises.

"As a matter of principle, pay review bodies are a very significant part of resolving the pay issues. But obviously we've also got to take account of the effect on inflation.

"That would be irresponsible not to do that. Pay is a significant element of that.”

For their part, the Liberal Democrats said Mr Sunak should help people rather than telling them to be calm amid the dire economic situation.

Party leader Ed Davey said: "Struggling homeowners will be rightly furious after watching an out-of-touch Prime Minister who has no idea of the pain caused by rising mortgage rates.

"Rishi Sunak's patronising advice to struggling families coping with the cost-of-living crisis shows why he is not up to the job.

"People need help, not a Prime Minister instructing them to hold their nerve."

Updated: June 25, 2023, 1:58 PM