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Cost of living: the endless squeeze Cost of living: the endless squeeze
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A week on Thursday, government statisticians will present the GDP figures for the second quarter of this year – to the sound of a huge sigh of relief. The UK's national income grew quite strongly this spring, the numbers are likely to show; which will be all the reason David Cameron and George Osborne need to argue that their strategy is working. The cuts, the tax rises, the planned deregulation and privatisations of everything from toll roads to Royal Mail: they certainly weren't popular and they may not have succeeded in bringing down borrowing or triggering a surge in growth – but the ship is turning around. At last, the medicine is working, ministers will argue; don't let the other side muck it up. And they will continue to argue that all the way up until the general election.A week on Thursday, government statisticians will present the GDP figures for the second quarter of this year – to the sound of a huge sigh of relief. The UK's national income grew quite strongly this spring, the numbers are likely to show; which will be all the reason David Cameron and George Osborne need to argue that their strategy is working. The cuts, the tax rises, the planned deregulation and privatisations of everything from toll roads to Royal Mail: they certainly weren't popular and they may not have succeeded in bringing down borrowing or triggering a surge in growth – but the ship is turning around. At last, the medicine is working, ministers will argue; don't let the other side muck it up. And they will continue to argue that all the way up until the general election.
It's surely good news if the economy is no longer flatlining, though one needs to interrogate what kind of growth the UK is likely to register; whether it is strong and inclusive and driven by rising wages, rather than (as looks to be the case at the moment) unequal and dependent on debt and house prices. But there are other reasons to think that some of the GDP celebrations are likely to ring hollow; and two of them come from this week in the form of Tuesday's inflation report and Wednesday's labour-market statistics.It's surely good news if the economy is no longer flatlining, though one needs to interrogate what kind of growth the UK is likely to register; whether it is strong and inclusive and driven by rising wages, rather than (as looks to be the case at the moment) unequal and dependent on debt and house prices. But there are other reasons to think that some of the GDP celebrations are likely to ring hollow; and two of them come from this week in the form of Tuesday's inflation report and Wednesday's labour-market statistics.
Prices are rising at their fastest pace in over a year. Indeed, at 2.9% the consumer-price index stopped just short of the full percentage point above the Bank of England's inflation target; which would have been an embarrassing task for the new governor, Mark Carney, to undertake. What's more, inflation is unlikely to drop significantly any time soon. The producer prices report, also issued on Tuesday, showed accelerating manufacturers' costs. And it was buttressed by the warning from big energy companies that household bills are likely to be higher than assumed by officials.Prices are rising at their fastest pace in over a year. Indeed, at 2.9% the consumer-price index stopped just short of the full percentage point above the Bank of England's inflation target; which would have been an embarrassing task for the new governor, Mark Carney, to undertake. What's more, inflation is unlikely to drop significantly any time soon. The producer prices report, also issued on Tuesday, showed accelerating manufacturers' costs. And it was buttressed by the warning from big energy companies that household bills are likely to be higher than assumed by officials.
The bigger picture, though, will be confirmed by the labour market report: British workers and their families are suffering the fiercest squeeze in decades. With inflation at 2.9% and wages rising (at the last count) by only 0.9%, Britons are getting poorer year after year. Factor in inflation and median wages are down 10% since Lehman Brothers fell over. Try telling those workers that the coalition's economic strategy has come good. Ministers may well argue there is not much they can do about energy prices or wheat markets or how much BA charges for its flights. That is mostly true, but when it comes to the domestic utility firms there is scope to do more. Ed Miliband is heading towards the right place with his vow to break up the big six energy firms. Amid a historic slump, there are no prizes for politicians claiming their hands are tied – and nor should there be.The bigger picture, though, will be confirmed by the labour market report: British workers and their families are suffering the fiercest squeeze in decades. With inflation at 2.9% and wages rising (at the last count) by only 0.9%, Britons are getting poorer year after year. Factor in inflation and median wages are down 10% since Lehman Brothers fell over. Try telling those workers that the coalition's economic strategy has come good. Ministers may well argue there is not much they can do about energy prices or wheat markets or how much BA charges for its flights. That is mostly true, but when it comes to the domestic utility firms there is scope to do more. Ed Miliband is heading towards the right place with his vow to break up the big six energy firms. Amid a historic slump, there are no prizes for politicians claiming their hands are tied – and nor should there be.
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