To the unsurprise of anyone not rolling in money, UK inflation rose in December. For the Tories, it dashed expectations of a slowdown, dimming hopes of an early interest rate cut, and prolonging a cost-of-living squeeze before the general election. Charities, trade unions, and even capitalists have hit out – some directly blaming Rishi Sunak’s Conservative government
Inflation: up again
The Consumer Prices Index (CPI) inflation rate accelerated slightly to 4% in December 2023. Rising alcohol and tobacco prices sparked the first increase since February 2023, the Office for National Statistics said in a statement.
That is double the Bank of England’s (BoE’s) official target of 2% and the highest level in the G7.
The hotter-than-expected data is a blow to embattled Tory PM Sunak, who is trailing behind other Tory leader, Labour’s Keir Starmer, in opinion polls ahead of a general election this year.
Britain’s recession-threatened economy is already buckling under a cost-of-living crisis and increasing industrial unrest over pay.
The BoE has lifted interest rates to a 15-year peak in a bid to dampen inflation. However, it has worsened inflation because commercial lenders pass on loan costs to businesses and consumers.
Sunak had in October achieved his long-held goal of CPI falling below 5%. That is, of course, his goal – for the rest of us it merely meant prices were still rising at an extortionate 5%.
Most alleged analysts had forecast a December slowdown to 3.8%, after CPI touched a two-year low of 3.9% in November. Clearly, they were way off the mark.
Tories: it’s not our fault (unless inflation comes down)
Chancellor Jeremy Hunt came out early with the excuses:
As we have seen in the United States, France and Germany, inflation does not fall in a straight line, but our plan is working and we should stick to it.
Of course, as people were pointing out on what the Canary still calls Twitter, the Tories seem to think they can have it both ways with inflation:
you know they took a lot of credit for cutting inflation, but not seeing as much ownership over today’s “unexpected” rise 🤔
— Ava-Santina (@AvaSantina) January 17, 2024
I wonder if any economists can provide an explanation of the universal rule that rising inflation is always due to “external” or “global” factors but falling inflation is always due to government actions.
— Kit Yates (@Kit_Yates_Maths) January 17, 2024
The same analysts who missed the December rise still predict inflation will slow this year. However, they warn that shipping costs will increase as a result of the situation in the Red Sea.
KPMG UK chief economist Yael Selfin said:
Despite a December rise, inflation is expected to continue falling this year… Nevertheless, disruptions in the Red Sea impacting supply chains could cause further increases in goods prices adding uncertainty to the economic outlook.
But away from the corporate capitalist commentary, other organisations were less than impressed:
Workers: £15,000 a year worse off
Trades Union Congress (TUC) general secretary Paul Nowak said:
After 14 years of stagnating living standards you’ll struggle to find many people who feel any better off. Prices are still going up with inflation at double the Bank of England’s target. And whether it’s covering the weekly shop or paying the bills families remain under the cosh.
If real wages have grown at their pre-crisis trend the average worker would be earning around £15,000 a year more. The Conservatives have delivered a decade of dismal economic growth which has hit pay packets and household budgets hard.
Muddling through is not good enough. We need a government with a serious long-term plan.
Benefit claimants: not enough money to live on
Pointing out that food price inflation was still at an outrageous 8.0%, Joseph Rowntree Foundation (JRF) senior economist Rachelle Earwaker said:
As winter sets in, now is a bad time for progress on inflation to stall. Inflation remains at double the Bank of England’s target, and the price of essentials like fuel and food are much higher than they were, with food inflation falling but still running high at 8%.
Anyone who needs to use their heating to stave off freezing temperatures this week can expect to pay over 80% more than what they did three years ago.
Price rises have outstripped increases in benefits which won’t increase again until April, and, even then, won’t make up the difference. Around 6.6 million low income households (56%) reported not having enough money for either food or heating their home between May and October 2023. Around 2.4 million households (20%) didn’t have enough money for both food and heating.
It’s not right that our social security system, which is meant to protect all of us when we fall on hard times, doesn’t give families enough to afford the essentials. All political parties must commit to introducing an ‘Essentials Guarantee’ to Universal Credit to ensure everyone has a protected minimum amount of support to afford the essentials.
Even capitalists are not happy
Plus, even capitalists are kicking off. Nicholas Hyett is an investment analyst at the Wealth Club. He said:
A surprise jump in inflation is not good news.
Policy makers, mortgage holders, investors and the average shopper had all been hoping price rises continued to slow over Christmas – clearing the way for lower interest rates and easing the cost of living crisis. Christmas was particularly expensive for those indulging over the festive break, with alcohol and tobacco the driving forces behind the uptick inflation, although food and non-alcoholic drinks continued to see inflation slow.
But, while the rise in headline inflation will attract the attention, longer term its the stubbornly high core inflation that is a greater concern. Still running at over 5.1%, until this comes down the UK will be very vulnerable to global economic shocks that cause spikes in food and energy prices – and we’ve seen all too many of them recently.
So, happy new year. If you were wondering why Christmas seemed even more expensive than usual, well now you know. Of course, it isn’t the Tories fault – said no one except the Tories.
Featured image via ITV News – YouTube
