Despite some over-egging by enthusiastic Conservative MPs, inflation is still in double digits – 10.1% to be totally accurate (see recently published ONS figures). It peaked last October at 11.1% – the highest rate for over 40 years.
Average pay rose 6.6% in the three months to February but once adjusted for inflation, that’s a real terms fall of 3%: one of the largest falls in wages since comparable records began in 2001 according to the Spectator.
This burst the bubble on two frequently made claims. First, wage pressures are not fuelling inflation – they are chasing it. Secondly, there is not some mysterious productivity challenge or worklessness that is making the economy sluggish. Job vacancies have fallen for the ninth consecutive period – in other words, there are not enough jobs and they’re not in the right place.
As ever this all is hitting the poorest hardest with the London Economic reporting that the ONS revealed food prices increased by 19.1% year-on-year, the sharpest jump since August 1977.
Highest rate of inflation in Europe
Despite protestations from the Conservatives who would have you believe that we’ve never had it so good, we now have the highest rate of inflation in Europe.
We are now the ONLY country in western Europe with double-digit inflation in March after it fell less than expected. Prices for food and non-alcoholic drinks were 19.1% higher in March than a year earlier.
This of course hammers the poorest the hardest – but it impacts on average wage earners who continue to see their pay fall in real terms as food prices outstrip any wage gains.
The longest wage slump in modern history
This morning, ONS chief economist Grant Fitzner told Mishal Husain on Radio 4 that food inflation over the year was 19.1%, the new highest annual rate for 45 years. He explained that there are a lot of price pressures coming through the system. Imported food prices are up a staggering 29%. On the basis of this, I think we can safely say that Brexit is not leading to lower food prices. Although don’t forget those turnips that the hapless Thérèse Coffey urged us to eat.
Chancellor Jeremy Hunt struggled on CNBC this morning to explain just why the UK was doing so badly, although he still managed the claim that as a country in the last two years we are growing faster than Germany and France. Well, if you start off at the bottom then your rate of growth will proportionality be greater as you attempt to scrape your bottom out of the gutter.
There is little wriggle room for both the chancellor and the prime minister. For a start it is hard to squeeze wages against the backdrop of double-digit inflation AND the need to negotiate a settlement amongst key workers. This is the longest wage slump in modern history.
Today the Joseph Rowntree Foundation joined over 90 charities calling on all UK party leaders to guarantee essentials for families on low incomes and specifically to link the basic rate of universal credit to the actual cost of essential goods like food and utilities.
Health inequality – worst outcomes are in the North
Today also sees the launch of Health Equity North’s report that exposes the growing divide in health outcomes between the North and the rest of the country.
The report analyses the latest available data on life expectancy, infant mortality rates and self-assessed health, disability, and unpaid care, and exposes the worsening health divide between the North and the rest of England.
Professor Kate Pickett, HEN academic director, professor of epidemiology, University of York, and co-author of the report, said:
“The North’s health burden not only impacts the wellbeing of everyone within the region, it also has a direct impact on economic health. Good health is important for productivity and it’s time for targeted measures to be put in place to address the social determinants of health. Only then will the health and prosperity of the North have the opportunity to thrive.”
It makes for sobering reading.
Sunak faces a stark challenge
And it makes for a challenging time for the government especially when they made ‘halving inflation’ one of its top five pledges for the year. As the Spectator says this will cause fresh headaches for both the Bank of England and the government. Core inflation – which excludes energy, food, alcohol and tobacco – is sticking at 6.2% on the year, more than three times the Bank’s target of 2%.
Sunak is in more trouble than he thinks. With the prime minister on the back foot over declaration of interests and questions over transparency, he now has to talk up the economy. How he squares this in time for some good local election results in key seats will be more than interesting – some might say it’s damn near impossible.