Inflation rises again: hiccup on the road to economic stability

May 20, 2014
The Mole

Latest figures play into Ed Miliband's hands – though he appears out-of-touch with his own family finances

Christopher Furlong/Getty Images

The latest inflation figures, released this morning, show the year-on-year rate rose from 1.6 per cent in March to 1.8 per cent for April. It's a hiccup David Cameron could have done without two days ahead of the local and European elections.

Wage figures for April, due out tomorrow, are expected to show slower growth – 1.7 per cent or less – which would add strength to Labour leader Ed Miliband’s claim that Cameron and George Osborne, the Chancellor, are out of touch with ordinary people and the cost-of-living crisis affecting them.

Earlier this week, Mark Carney, the Governor of the Bank of England, suggested Britain was about to experience “sustained real wage growth”.

But if prices are rising faster than wages again, that will put a big question-mark over Carney's assumption. As the BBC's Economics Editor, Robert Peston, tweeted: '"Looks like [a] squeeze in real earnings again... no great surge in living standards."

However, today's inflation figures from the Office of National Statistics do raise a glimmer of hope that the super-inflationary rise in house prices could be tailing off. Average house prices across the UK rose year-on-year by eight per cent in April, compared with 9.2 per cent in March.

However, there are wide disparities across the regions: in London, the year-on-year increase has fallen from 17.8 per cent to a still staggering 17 per cent, while in the Northwest the rate has fallen from 5.9 per cent to 3.1 per cent. 

Carney, who is conducting a review of the government's controversial help-to-buy scheme to see if it is contributing to the over-heating of the housing market, may still need to intervene.

The Prime Minister told Radio 4's Today programme - before the new inflation figures came out - that he would consider reducing  the current upper limit of £600,000 on the help-to-buy scheme in order to reduce the subsidised mortgages for those seeking to buy the most expensive houses.

Commenting on the new inflation figures, TUC general secretary Frances O’Grady said: "Last month we were told the living standards crisis was over, yet one month later… even on a measure that excludes the cost of housing, prices are rising faster than wage packets.

"It will be years before workers even recover the earnings they have lost since 2008, let alone start to feel any better off."

A general election voting intention poll for Tory peer Lord Ashcroft published yesterday showed Labour have, in just a week, climbed from two points behind the Tories to six points ahead (35 per cent to 29 per cent). This huge disparity suggests the Tory peer's new polling needs to settle in.

But it should be of concern to Cameron and Osborne that Ashcroft's polling shows Labour currently enjoying a 13-point lead over the Tories on “tackling the cost of living”. 

On the other hand, Ed Miliband did not cover himself with glory this morning when he was asked on ITV's Good Morning to say how much his family spent on the weekly shopping bill. 

Miliband, clearly unsure, took a stab at £70 - until it was pointed out that even the average British family food bill is over £100.

On the campaign trail, the Labour leader hurriedly adjusted his sums after talks with his spin-doctors. He told BBC Radio Oxford: "Well, I said this morning it was on the basic groceries, the basic fruit and vegetables, about £70 or £80 - the total shopping bill was slightly higher than that, obviously."

Er, yes, obviously.

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