Inflation

By now, George Osborne will have seen tomorrow’s GDP figures and I suspect will be having a mid-afternoon whisky. Ed Balls will be warming up for his demands for a Plan B. “Austerity isn’t working,” he’ll say — and will doubtless tour TV studios with his usual bunch of dodgy assumptions which he hopes broadcasters won’t challenge. Here, as a counterweight, are a few facts and figures about austerity, how harsh it is, etc. — and the case for a Plan A+. 1. Where are the “deep, harsh” cuts? The Q2 GDP data will complete the economic picture for the first year of George Osborne’s time in the Treasury. But

Away from the clamour in the chamber over the bowdlerisation of the NHS reforms, a group of MPs led by Robert Halfon convened in Westminster Hall earlier this afternoon to debate how rising fuel costs might be abated. Treasury minister Justine Greening attended for the government. With the average price of unleaded at 136.9p/litre and diesel at 141.5p/litre last month, fuel costs are now a major concern for ordinary families. According to the campaign group Fair Fuel UK, who are working with the MPs, the average motorist who has to drive to work spent £33/week on petrol last year, taken from median pre-tax earnings of £499/week in 2010. With inflation

New inflation stats are out tomorrow and they’re expected to show further rises in CPI and RPI.  Aside from their brief peak in 2008, headline rates of inflation are now at their highest levels for 19 years.  That’s prompting more discussion about the way rising prices are playing out for Britain’s households, from a nice graphic in today’s Times (£) to a new report due out tomorrow from the IFS.  But one implication of today’s higher inflation environment is receiving less attention – the impact of rising prices on work incentives. Inflation and work incentives aren’t often mentioned in the same breath.  But when work-related costs rise more quickly than

So what does George Osborne mean by “flexibility“? Do we hear the quiet sound of a gear change, prior to a u-turn? No, I’m told, it’s Plan A all the way. And here are the details. The government’s five-year departmental budgets (the so-called DEL limits) are set in stone. They won’t change (in cash terms) until April 15, after which no figures have been set. If inflation continues to be high, then this will exacerbate the real effect of the cuts (Osborne has already seen trouble caused by with this as inflation has turned the tiny NHS budget increase into a tiny NHS budget decrease). The OBR reckons it may

He left with a warning. “I think that there is a big risk emerging to the credibility of the Bank,” said Andrew Sentance last night, on his final day as a member of the Monetary Policy Committee. And he continued, “If inflation does not come down in the way that the Bank is suggesting — and I think there is a big risk that is the case — then that is going to have a big knock on effect on the credibility of the bank’s commitment to its inflation target.” Sentance’s views are unsurprising. He has, after all, been pushing for an interest rate hike for some time, and for

There’s been much debate on these pages about the political implications of higher inflation. Ironically, this morning’s news of record food prices could relieve the pressure on the Bank of England Governor. His argument for caution when it comes to a rate rise is based on the claim that UK inflation is now being driven by events beyond the MPC’s control. Today’s figures reinforce that case, showing that global commodity prices remain a key driver of the rising cost of living in Britain’s households. The same argument doesn’t really work for the Chancellor, whose remit isn’t just to keep headline inflation down, but also to help households cope with the

“It’s not imminent. But you can see this happening.” So sayeth Vince Cable about the prospect of another global financial crisis, in interview with the New Statesman today. To be fair, you can see his point: there is a pervasive sense that the contradictions of the banking sector still haven’t been fixed, and — as I have written recently — our economy, and economies worldwide, are still afflicted by debt of all varieties. But that’s not going to calm those Tories who regard Cable as a combustive liability. In the weeks since the Lib Dems’  annihilation at the polls, the Business Secretary has increasingly reverted to his pre-coalition form: a

Here are letters N to S in our A-Z guide the coalition’s first year. A-F are here. G-M are here. N is for No Nothing has frayed coalition relations quite like the AV referendum has. This was always going to be the case, but the viciousness it inspired has still been fairly shocking. Need we remind you of Chris Huhne’s outburst in Cabinet last week? Or of George Osborne’s stinging riposte? Even David Cameron seems to have relished taking it out on his coalition stablemates, trashing their pet policies with a vigour that would have been unthinkable only a few months ago. As Tim Montgomerie reveals in his exhaustive guide

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?

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

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