Rishi Sunak warns of tough few months as inflation soars

Rishi Sunak is to warn that the next few months "will be tough" after it was revealed prices are rising at the fastest rate for 40 years.

In a speech to businesses later, the chancellor will admit he "cannot pretend" it will be easy to cut the cost of living crunch for families.

It comes as a think tank said the poorest were being hit hardest by steep rises in energy bills.

Households are also dealing with record fuel costs and surging food prices.

The surge came as millions of people saw an unprecedented £700-a-year increase in energy costs last month.

But at the annual CBI dinner later, the chancellor will tell businesses: "There is no measure any government could take, no law we could pass, that can make these global forces disappear overnight.

"The next few months will be tough. But where we can act, we will."

He is expected to call on businesses to boost investment and training in order to grow the economy and help ease the cost of living crunch, pledging to cut taxes on firms this autumn in return.

Around three quarters of the rise in inflation in April came from higher electricity and gas bills, according to the Office for National Statistics (ONS).

A higher energy price cap - which is the maximum price per unit that suppliers can charge customers - kicked in last month, meaning homes using a typical amount of gas and electricity are now paying £1,971 per year on average.

Fuel prices have also surged, with the RAC motoring group on Wednesday warning that petrol and diesel prices have hit new records of £1.68 and £1.81 per litre respectively.

Up until now households of all incomes had faced similar rates of inflation, but the poorest are now being hit hardest by rising prices because they have to spend far more of their household budgets on gas and electricity, the Institute for Fiscal Studies said.

Citizens Advice said "the warning lights could not be flashing brighter" and the government needed to offer households more support, while debt charities urged anyone finding it difficult to pay bills to seek help earlier rather than later in the year.

"There are desperate stories behind these figures," said Dame Clare Moriarty, chief executive of Citizens Advice. "People washing in their kitchen sinks because they can't afford a hot shower; parents skipping meals to feed their kids; disabled people who can't afford to use vital equipment because of soaring energy bills."

Health analyst Cheryl Holmes, a mother-of-two, said she was trying to keep her living costs "as low as possible" by spending less on food and clothes, and cancelling TV subscriptions.

"I've already for several years been turning the lights off in each room, setting the heating on a timer, making sure I'm using a full dishwasher and washing machine and I'm running out of ideas.

"It's a battle and it seems like there's not really much more that I can do."

Inflation is the rate at which prices are rising. For example, if a bottle of milk costs £1 and that rises by 9p, then milk inflation is 9%.

The Bank of England warned earlier this month that the cost crunch could leave the UK on the brink of recession, with inflation peaking at over 10% later this year amid further expected rises in energy bills.

The Bank's has raised interest rates four times since December to try to cool prices, but MPs have accused it of not doing enough.

But the UK now has the highest rate of inflation (9%) of any G7 country, including Germany (7.4%) and France (4.8%).

With households under increasing pressure, the government faces growing calls to offer more help.

At Prime Minister's Questions, Labour leader Sir Keir Starmer pressed the prime minister to bring in a one-off tax on oil and gas profits, arguing it would raise "billions" to help.

Boris Johnson, who has so far refused to back the idea, said he would "look at all the measures" needed to help people struggling with rising bills.

He added that the government was "not in principle in favour of higher taxation".

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