Inflation

Saturday

Fraser Nelson

Andrew Sentance: interest rates must rise

Inflation – the cost of living – is the number one issue in Britain today. It is under-discussed in the House of Commons as MPs have no say in it: the task of controlling inflation lies with Mervyn King and his nine-strong Monetary Policy Committee, and its members are rarely interviewed. Little wonder, as a lot of them should be feeling fairly sheepish. But not Andrew Sentance. He’s been arguing for a rate rise for months, and doesn’t have long left to serve on the MPC, so he can speak quite freely. Inflation has been above target almost all the time he’s been on the MPC, he says, so in

Friday

Fraser Nelson

How the banks were framed

A week that started with the Vickers review on banking has closed without another national explosion of banker-bashing. Thank God. Beating up on the banks has lasted almost three years now, and it’s blinding us to the real causes of the financial crisis. The banks are the perfect alibi: blaming them gets everyone off the hook. How, asks Gordon Brown, was a mere Prime Minister to know that banks were doing such fiendishly complicated things? How, asks George Osborne, was an opposition expected to detect what the government could not? How, asks Mervyn King, was the Bank of England governor supposed to know that these bankers had been so wicked?

Tuesday

Peter Hoskin

Panic over? Perhaps not…

Is the inflation panic over? After rising for five consecutive months, CPI inflation went down by a 0.4 percentage points in March, to 4.0 per cent, taking the City by surprise. RPI inflation also went down, by 0.2 percentage points. The numbercrunchers at the Office for National Statistics put it down, largely, to a fall in food and drink prices. The cost of fruit is 2.7 per cent down on last March. The cost of bread and cereals, 2.6 per cent. Yet we shouldn’t get ahead of ourselves. While this will certainly reduce the short-term pressure on the Bank to increase rates — as well as on the nation’s pocketbooks

Saturday

Fraser Nelson

Osborne needs to make his case for growth

The Guardian have an odd story today. “Business chiefs who backed cuts now doubt UK growth,” runs the headline — suggesting that these sinners are now being confronted with the error of their own ideology. Who are the business chiefs? We have Archie Norman, the retired head of Asda, now part-time chairman of ITV. He “said the government’s growth targets were too optimistic”. Set aside the fact that the government doesn’t make growth targets now, and has subcontracted that the Office for Budget Responsibility. Where is the connection between growth downgrades and cuts? In the imagination of The Guardian, I suspect. Next Andy Bond, another former head of Asda, is

Wednesday

Peter Hoskin

Winners and losers | 6 April 2011

The birds chirruping in the sunlight clearly didn’t get Ed Balls’s memo. Otherwise they’d know that today is “Black Wednesday,” the day when the coalition’s tax and benefit policies swoop in to leave the average household some £200 a year worse off. This is the message that the shadow chancellor is broadcasting this morning, be it on Radio 4 or in a post for Labour Uncut. His claim is that the coalition is — by going “too far, too fast” on the deficit — merely squeezing the “squeezed middle” even more. Only that’s not quite the full picture. The Treasury, for one, is pointing out that today’s measures will actually

Thursday

Fraser Nelson

Scouring the Budget small print

This morning’s newspapers have a feast of analysis on the Budget. I’ve covered 15 of them, and what journalists normally do is spend the day trawling the small print of the Budget document hunting for stories. But this time, the stories seem to have migrated to the Office for Budget Responsibility’s accompanying report, packed with new analyses and metrics — even disaster scenarios — which those with an interest in UK economics will find useful. The OBR document is now released with the Red Book, and speaks with the authority of government economists who (unlike the rest of us) have had weeks to chew over Osborne’s claims. The OBR must

Wednesday

Mark Littlewood

Osborne made a start on deregulation, but there’s a long way to go

This was always going to be a rather modest budget. Having set out the Comprehensive Spending Review last year, the government had already decided its broad plan; we were never going to see much more than some minor tinkering. Nevertheless, as a budget billed as a serious driver for growth, it is a disappointment. George Osborne seems to have a reasonable understanding of the problems that need tackling, but he seems shy of solutions. Concerned about the regulatory burden on business and enterprise, the Chancellor announced that he would reduce the cost of compliance by £350m. But, even on his own figures, this is a tiny slice of the £90bn

James Plunkett

Osborne the Reformer is an unfinished work

One interesting aspect of today’s Budget is the government’s change of tack on personal allowances. Back in June 2010, when the Chancellor committed to raise allowances from £6,475 to £7,475, he chose to cancel out the gains for higher rate taxpayers by lowering the level at which the 40p tax rate kicks in. The idea was to focus the gains of the policy on basic rate taxpayers, making things a little more efficient. The 40p threshold will therefore be lowered from April this year from £43,875 to £42,475 with the result that 700,000 people will become higher rate taxpayers. Needless to say, that’s proved unpopular, and so this time around

Peter Hoskin

The big question: has Osborne done enough to deal with inflation?

“We understand how difficult it is for so many people across our country right now.” If you weren’t sure which direction George Osborne’s Budget was going to head in, then he clarified it right from the start of his speech. This was one to tackle the rising cost of living. And much of it — such as the raise in the personal allowance and the fuel duty cut — was welcome. But there is a nagging question hovering above Osborne’s announcement today: has he done enough? The Chancellor will certainly hope so. After all, by scrapping the fuel duty escalator he has effectively encoded a tax cut into all of

Tuesday

Peter Young

Confiscation through inflation

Inflation has now reached its highest level for 20 years, today’s figures reveal. But we will suffer not just because of the increased cost of living, but also because the government will penalise us by taxing our illusory gains. The Adam Smith Institute has calculated that about half of the £3.3 billion that the government plans to raise through capital gains tax (CGT) next year (2011-12) will come from taxing purely inflationary gains.   “Fairness” is said to be an attribute of the coalition’s fiscal policy. But it is difficult to see how this can be seen as anything other than extremely unfair. The main CGT rate was raised from

Matthew Whittaker

Spiralling inflation continues to squeeze some more than others

The February inflation figures spell more bad news for living standards in the UK. With average weekly earnings growth standing at just 2.2 per cent, millions of workers continue to get poorer in real terms. However, differences in the make-up of typical “shopping baskets” mean that the spending implications of inflation vary by income group. Since 2007, inflation has been driven primarily by increases in food and fuel prices. Given that such staples account for a larger share of weekly expenditure among lower income households than among higher income ones, the impact is felt more acutely in the lower half of the income distribution. The below chart details the impact

Fraser Nelson Fraser Nelson

Inflationary troubles ahead of Osborne’s Budget

Unwelcome news for George Osborne: he will tomorrow present his Budget against a backdrop of the highest inflation for 20 years. The RPI index — what the nation called “inflation” until Brown changed the definition — is 5.5 per cent. It hasn’t been this bad since the aftermath of the ERM crisis, an unhappy comparison for the Tories. The CPI index is up to 4.4 per. And those who deploy the usual arguments about global food prices are spiking might wonder: why is Britain now even worse off than Greece?     Even the Zimbabwean media is laughing at us (their inflation is now considerably lower than ours). It’s shocking,

Thursday

Fraser Nelson

Our monetary policy needs sorting — and quick

Today’s decision to leave base rates at an emergency 0.5 per cent — the lowest since the Bank of England was founded in 1694 — shows how Britain is running out of options. Not even Mervyn King would deny that Britain has an inflation problem: global prices may be up, but the UK seems to have been hit worse than almost any major economy, as I blogged yesterday. With food prices up by 6.3 per cent and CPI inflation by 4.1 per cent, what’s happening to prices? The below graph, again out today from a FTSE350 survey, suggests that pay is up by just 0.5 per cent in the private

Wednesday

Fraser Nelson

Labour’s inflation pitch

Curiouser and curiouser. We in Coffee House have been saying for some time now that – whatever Mervyn King thinks – Britain has the worst inflation in the Western World apart from Greece. An OECD report out today shows we’ve got it worse than most eastern countries too. Korea, Turkey and Estonia are the only eastern nations with higher inflation: But what strikes me most about today is that food prices are soaring here, to an extent far worse than the rest of the world. This is what voters notice most: putting food on the table is very expensive. As Micawber might put it: annual food price inflation 6.3 per

Sunday

Fraser Nelson

Why Ed Miliband’s getting it right on the cost of living

George Osborne’s budget, due in two weeks’ time, will be billed as an agenda for growth. This is welcome, but a year late. The burning agenda now is the cost of living. It was our cover story for The Spectator last October: why fret about mild 1 percent-a-year cuts, we asked, when the real killer will be prices? Petrol at 130p a litre is only the most visible sign of this. Other horrors confront shoppers in the supermarket – salmon fillets up by a third, potatoes and butter by a quarter. When Alan Duncan speculated that petrol could hit 200p, he was on the right scent. While the BBC is

Tuesday

Peter Hoskin

Osborne goes on the offensive

Attack, attack, attack. That’s the temper of George Osborne’s article for the Guardian this morning, which sets about Labour’s economic credibility with a ferocious sort of glee. Perhaps the best passage is where he asks how many times Labour can spend their ubiquitous “bank tax,” but this is more pertinent to the recent debate: “Where does all this leave Ed Miliband’s newfound enthusiasm for the “squeezed middle”? Let’s pass over his failure in every interview to define it – his last effort included around 90% of taxpayers. Where we can all agree is that these are difficult times for family incomes. There are two root causes. One is global: rises

Monday

Peter Hoskin

Miliband’s latest break with the past

As an independent creature, the Resolution Foundation’s new Commission on Living Standards isn’t doing Ed Miliband’s work for him. But, boy, must the Labour leader be glad that they exist. At their launch event this morning, the “squeezed middle” – aka low-to-middle earners – suddenly took shape. There were graphs, such as those in James Plunkett’s post for us earlier, setting out the very real problems facing a segment of British society. And there were even definitions explaining what that segment is: 11 million adults, by the Resolution Foundation’s count, too rich to benefit from measures for the least well-off, and too poor to be entirely comfortable. This was a

James Plunkett

Three charts that complicate a simple focus on growth

GDP growth figures have become the barometer of choice for commentators trying to tell the political weather – a good measure of how the public will eventually fall in the faceoff between Osborne and Balls. The story goes that a return to sustained growth will mean a return to rising living standards.  That means a vindication of the government’s position, and a victory for the Chancellor. As a simple story, that makes sense if the pressures now facing Britain’s households are straightforwardly growth-related – if, in other words, we’re in a post-recession hangover that will vanish when growth returns. But there’s now mounting evidence of a deeper problem for living

Peter Hoskin

Will Cameron have a Brown moment over petrol?

Remember when Gordon Brown came up against Fern Britton in a TV interview? I’ve pasted the video above to remind CoffeeHousers of two persistent truths: how tricky a subject petrol costs can be for a serving Prime Minister (watch on from around the 0:50 mark), and how Labour are hardly blameless when it comes to the current cost of fuel. As Britton asks in the interview, “How much tax do you put on the fuel?” And the answer that Brown mumbled to avoid, from a House of Commons briefing note at the time, was this: In other words, for a huge portion of the New Labour years, fuel duty accounted

Sunday

Peter Hoskin

Labour sets about warning of a “cost of living crisis”

Ed Balls has been warming up to this one for a while, and now it has finally come: an all-out attack over rising prices. In an interview with the Sunday Times (£), the shadow chancellor warns of Britain’s “cost of living crisis,” and demands that George Osborne reverse the VAT increase. Much of his pleading is made on behalf of motorists, who – as I pointed out a couple of days ago – face punishment at the petrol pumps. He doesn’t even mention spending cuts once, especially not where his own party’s are concerned. Rising costs, clearly, are the new weapon of choice. And it’s not just Balls. Ed Miliband