The government is facing calls for urgent action to tackle rising energy prices after Bank of England governor Andrew Bailey raised interest rates to 1.75% from 1.25%, the biggest single rise since 1995, to an attempt to control rampant inflation. The Bank’s Monetary Policy Committee (MPC) forecast inflation to peak at 13.3% in October, the highest level in more than 42 years. He warned that poor economic conditions would see real household incomes fall for two consecutive years, the first time this has happened since records began in the 1960s. But as the bleak economic outlook unfolded, both the prime minister and Mr Zahawi were away from Westminster on holiday. Politics Hub: Sunak and Truss prepare for Sky News Battle for Number 10 leadership special The chancellor is believed to be working remotely while she is away for a few days. “There is no such thing as a holiday and not working,” the chancellor said. “I’ve never had it in the private sector, never in government, ask any businessman and they’ll tell you. “Millions of us dream of getting away from our families, but the privilege and responsibility of public service means you can never switch off, so I have calls and updates every day and continue to do so.” The prime minister’s official spokesman confirmed last week that Johnson would go on holiday from Wednesday, despite having only been in office for just over a month. Use Chrome browser for more accessible video player 1:52 Returning inflation to 2% remains a “priority” The prime minister will remain in charge of the country, receiving updates as needed, he told reporters. Downing Street did not give details of where the prime minister would spend his annual leave until the end of the week and insisted he would continue to run the country. Asked who would be in charge while Mr Johnson was away, the prime minister’s official spokesman said: “It will be standard practice. “The prime minister will be briefed as required. The deputy prime minister and, as always with a cabinet government, other ministers, will be on hand to support if needed.” Use Chrome browser for more accessible video player 2:45 ‘Gloomy, bleak forecast’ for the UK economy However, Mr Zahawi responded to the Bank of England announcement. “Along with many other countries, the UK is facing global economic challenges and I know these forecasts will be worrying for many people,” the chancellor said. “Tackling the cost of living is a top priority and we have taken action to support people in these difficult times with our £37bn household help package, which includes direct payments of £1,200 to the most vulnerable families and a £400 discount on everyone’s energy bills. “We are also taking important steps to bring inflation under control through strong, independent monetary policy, responsible tax and spending decisions, and reforms to boost our productivity and growth. “The economy has rebounded strongly from the pandemic, with the fastest growth in the G7 last year, and I am confident that the action we are taking means we can also overcome these global challenges.” Read more: Energy price cap to remain above £3,500 until most of 2023, report warns Should workers outside London and the South East be paid less? How inflation affects different parts of the country The Treasury later published a readout of a conversation Mr Zahawi had with the governor of the Bank of England on Thursday afternoon, in which it said the two discussed the actions they are taking to combat high inflation and overcome economic challenges facing the country. Energy Secretary Greg Hunts said the government was working “steadily” on what was ministers’ “number one priority”, despite both Johnson and Mr Zahawi being away from Westminster. Pressed on how the Prime Minister and Chancellor can operate steadily while abroad, Mr Hunts replied: “Because we have already made the decisions in terms of the support package that is in place at the moment. “Some of these measures are still to be put in place – like the £400 bill support that will start in October, like those payments for disability benefits that will start in September. “So all of this entails a series of supportive measures for consumers and bill payers. “But this situation will remain under constant review and I’m sure whoever the next prime minister is, it will absolutely be their number one priority, as it is for the current and outgoing prime minister.” However, the Lib Dems accused the Prime Minister and Mr Zahawi of being “sickers”. “The least the British people can ask for is a Chancellor and a Prime Minister who will explain how they got us into this mess and what the plan is to sort it out. We need a general election to finally get rid of this dark Tory government .” said Democratic Foreign Affairs spokeswoman Leila Moran. Labor leader Sir Keir Starmer is also away on holiday. But Rachel Reeves, shadow chancellor, said the forecast was “further evidence that the Conservatives have lost control of the economy”.
