Rishi Sunak: 'I am hurting myself to help you'

Speaking to ITV News Political Editor Robert Peston, the prime minister dismissed criticism that his target to halve inflation by the end of the year is not 'ambitious enough'

Topps Tiles HQ, on the outskirts of Leicester, is familiar territory for Rishi Sunak because his aunt and uncle live down the road.

And today he was on familiar policy territory, when doing one of his regular visits to a British business, and then being interviewed by me - because there is little he enjoys more than talking about the economy and numbers.

He was bullish, following the announcement from the Office for National Statistics (ONS) that consumer price inflation had fallen to 6.8% - down from 7.9% in June and 11.1% last October - so he stands a reasonable chance of honouring his pledge to cut CPI inflation to 5.3% during the last three months of the year.

That said, and as I pointed out to him, today's inflation fall had almost no connection with anything he had done - because it was driven by a drop in the market price of gas and electricity prices, and a moderation in food inflation to a still-high 14.9%. 

He said to me that what he is choosing NOT to do means that inflation isn't getting worse.

And what he is not doing is borrowing lots more to cut taxes and increase spending on public services. 

Both to me, and to the Topps Tiles executives and guests, he put a new gloss on John Major's notorious phrase that "if it's not hurting it's not working" - namely that he says he is enduring political pain in the cause of disinflating. He is doing, he says, the right thing by the country, rather than the short-term thing to please his MPs.

Truthfully though, his pledge to halve inflation was always eccentric because he doesn't have the tools to bring about that fall in inflation. Or to be more accurate, he won't use the only tools that are theoretically available to him, which would be to order businesses to limit price rises, impose price controls, or to repeat the kind of massive subsidies the government deployed last year to cap energy prices.

Instead, he defers to the Bank of England (BoE) and its toolkit, which consists mainly of the manipulation of interest rates. But as I pointed out to the prime minister, wages are rising at record levels - 8.2% including bonuses - while so-called core inflation, which strips out energy and food, is stuck at 6.9%, and services inflation rose from 7.2% to 7.4%.

In other words, there is little evidence that an interest rate rise of more than 4.75% since inflation started to rise has had any material effect.

Sunak told me he belongs to the school of thought that says this is just a timing issue, that at some point the rise in interest rates will dampen wage and other inflationary pressures. 

But although the economy is currently a tiny bit stronger than the BoE and Office for Budget Responsibility (OBR) expected, there is still a risk of recession if interest rates are increased too much.

It is widely believed the BoE WILL raise interest rates again next month, and beyond.

So, if the PM hits his inflation target at the end of the year, but the economy's anaemic revival has stalled or gone seriously into reverse, his victory will feel bitter to him and to most of us.

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