Inflation hits 10-year high
Tuesday 17th June 2008, 11:50AM BST.
Soaring fuel and food prices today pushed inflation to 3.3 per cent – the highest level in more than a decade.
Bank of England Governor Mervyn King warned it could top four per cent by Christmas, heaping further misery on Britain’s ailing economy. His gloomy prediction came in a letter to Chancellor Alistair Darling on how the Bank in- tends to get inflation back down.
He had to write the letter because the cost of living is now more than one percentage point above the Government’s two per cent target.
Rises in the price of gas, electricity, groceries, meat and crude oil are the main contributory factors.
The Consumer Price Index, the Bank’s official benchmark for inflation, rose by 0.3 percentage points to 3.3 per cent during May – the highest reading since the measure was first reported in January 1997.
Nearly half of the leap came from soaring food and non-alcoholic drinks, which rose 7.8 per cent in May. The Office for National Statistics said the increase was mainly cause by spiralling meat costs, which more than doubled from 4.1 per cent in April to 8.8 per cent in May.
Bacon was singled out as having the biggest inflationary impact in this area
The costs of electricity, gas and other fuels rose by double digits. Oil prices have surged to a new record of nearly 140 US dollars a barrel – more than double the level of a year ago – feeding into higher pump prices for drivers and increased transportation costs and manufacturing prices for businesses.
Previous comparable annual inflation readings were last as high in July 1992 and the headline rate of Retail Prices Index inflation, which includes mortgage interest payments, rose to 4.4 per cent in May from four per cent in April, the ONS said.
The Bank’s Monetary Policy Committee is charged with keeping CPI inflation at two per cent. The Governor warned this year that he may have to write as many as three explanatory letters as inflation remained higher than target.
There will be a response from Mr Darling today.
This latest rise is expected to further reduce the scope for interest rate cuts in the near future.
By Business Editor Amy Bould
Shropshire Star on Twitter
Keep updated with the latest breaking news and content on our Twitter feed.
Lifestyle
Interactive Dining Out map
Hundreds of reviews by the Shropshire Star and Express & Star's teams to help you decide where to eat.
Entertainment
All the film reviews
Before you plan a trip to the pictures, get our critics' verdicts on all the latest movie releases.
OUR NEW APP
Get the new Shropshire Star app
Download the Shropshire Star’s new app to your iPad or iPhone to get one week of access to our digital newspapers absolutely FREE.
shropshirestar.com
Popular sections
Useful links
Hold on .. where is the word panic in this report? I’m missing a superlative here.
- considering the fuel ‘panic’ wasn’t (according to the voting on the papers site) – lets leave panic-mongering out please.
Report abuse
How come this is happening again, how can the ordinary working class person plan their lives when the economy fluctuates so dratically. Is it global, is it the fault of our government, I don’t know probably both, more to the point why can’t the experts get it right. I know our inflation at the moment is not anywhere near the rate of a lot of other Countries but it’s only a matter of time, watch this space.
Report abuse
We have mediocre politicians running a high tax mediocre country!
Report abuse
Big Gordon was the Chancellor of the Exchequer for 10 years. His chickens are coming home to roost now.
Report abuse
thank your lucky stars you are not living in 1990′s tory britain 15% interest rates and inflation let rip. well done gordon brown, keep it up
Report abuse
I’d say this was a conservative estimate! I don’t know which countries Janet refers to but our neighbours in Europe aren’t going through anything like this, they never do. We tie our economy and foreign policy to the USA and it does us no good at all.
Do you know we have the same population as France and 10 times as many soldiers in Iraq. We’re pouring our hard-earned money into a bottomless pit over there, not to mention the cost in terms of human lives. British soldiers are just treated like cannon fodder.
Report abuse
Liz and Devon – you’re both right.
And the more we tie our foreign policy and our economic policy to that of the US (which will inevitably happen if we weaken our ties with Europe, the worse it will get.
I have a wry smile when I see headlines claiming that ‘Inflation soars to 4 per cent’ – what short memories people have!
Report abuse
As far as I can remember 15% interest rates in the 90′swere only for one day, or am I mistaken??
Report abuse
As H said, G Brown set this up during the last 10 years, it might not be as bad as it was but its a lot worse than it could have been. And in the real world (fuel, food etc) its a lot higher than 4%
Report abuse
Inflation figures are manipulated so that the lowest possible number they can get away with is used. It is used all over the world. It will climb much higher yet. For the record, the Eurozone inflation has just hit a record 3.7%. They have a problem with the one size fits all when it comes to interest rates. The big problem is the debt bubble that Brown IS responsible for slowing the economy. Solution? Don’t vote for any of the self-interest main parties.
Report abuse
no doubt labour will still blame thatcher for this even though they been in power 10 yrs!
Report abuse
makes my 2.3 % NHS pay ”rise” feel like a slap in the face to see the private sector getting 14% and fat cat bosses leaving the banks in crises and getting a golden handshake to say bye bye. Also what about those city bankers, they caused the crises, now they get big bonuses each year which causes inflated house prices in london each year. somethings wrong in this country be the government red or blue, the rich get richer and everyone else gets poorer
Report abuse
Paul Pen,
I wouldn’t lay all the blame at Thatcher’s door, but it’s clear we are still living with the consequences of her dubious legacy. Consider the following: High energy prices, and massive profits for energy companies. Before Thatcher, these were nationalised industries – prices simply wouldn’t have been allowed to go up by the extreme amounts they have done. Even if they had, the ‘profits’ would be returned to the public purse, allowing perhaps for greater subsidy for those in greatest need. She also closed down the country’s home-grown resource of coal. Many of the pits she closed forever would have become viable again as the demand for energy increased.
The shortage of affordable housing. We had far more council houses before Thatcher. They had affordable rents and security of tenure for those on limited incomes. Thatcher sold them to those tenants lucky enough to be able to afford them – but crucially wouldn’t allow the money raised to be put back into buiding more such houses, so now we have an even bigger shortage of available housing.
Finally, locally available health care. We used to have things called cottage hospitals. Guess who closed them all? You got it!
Report abuse
Peter you analysis of the social costs of thatchers ‘efficiency savings’ are spot on. I would add the huge water bills, charging for dentists and many others to this list, sadly blair just did the same e.g. with universities. It seems every year taxes rise, yet, each year previously free services become chargable or rationed, be it bin collection, dentistry, free milk for school kids, higher education, the list is endless…
Report abuse
peter absolutely a1,and spot on, people have short memories of 1979-1997. let us now see what gordon brown can be found guilty of
1 credit crunch, er no usa and greedy uk banks and building societies
2 oil price er no, weak dollar, usa again, has pushed price of gold and oil fuelled by speculators
3 increase in food prices er no, world shortage caused by crop failures and india and china buying wheat etc causing world shortage
4 collapse in the housing market er no, all down to usa credit crunch and uk banks and building societies running out of money and causing mortgage rate to increase and mortgages to be as rare as hen’s teeth
5 what is gb guilty of? er 11 years of low interest rates and 11 years of relative growth all of which david cameron and his mates can only make goo goo noises over. i should not be surprised if government secrets left on trains were not tory plots.
now for heavens sake get off gordons back and let him get us out of this usa induced mess!!
Report abuse
Devon you do make me laugh, Is GB your son?
GB is well out of his depth. What is he guilty of?
1) Wasting billions on the tax credit system
2) Wasting even more billions on the nhs computer system that will never go in
3) selling all our gold at a fraction of the price it is now worth to pay for these
He has now started drowning on about “prudence” its a shame he hasnt listened to his own advice for the last 11 years, because at least their would be some money in the pot, instead i am now going to be paying an extra £100 car tax for a car i bought 4 years ago, nice one GB. Not a green tax at all, more like a tax to try and get you out of trouble, hopefully it will go the way of the 10p tax and he will realise he made ANOTHER mistake
Report abuse
How can you call the tax credit system a waste dave? If you look in my office you’ll see about 5 part timers who are mums who work now purely because of this system. under the tories they stayed at home contributing nothing because no incentive for those on low pay. Same for the unemployment rate, muchg better under labour now because low paid work pays because of tax credits and minimum wage. If you have old grans and grandads like i do you’ll see they are warm, well and surviving now due to policies like pension credits and winter fuel payments. under the tories, tens of thousands of old folk died each winter in freezing poor homes. Now they dont and the nation is richer as a result as the strain on the UB40 and the NHS is lifed and more people work and contribute to society. Only a fool would describe helping the poor as a waste, its a moral duty and an economic neccessity.
As for the gold wait of course now it seems a bad deal but in a few years and you will think he got a bargain. Markets go up and DOWN remember that. PS – You deserve to pay more for your car you winger, stop polluting my air or pay for the privelege!
Report abuse
all i ask is those who lived through maggies and majors reign should remember the poll tax, 15% interest rates, negative equity, high inflation, 3,ooo,ooo + unemployed and compare that to how “hard done by”we are now.
Report abuse
As for the 10p tax rate – that was a mistake in some ways. Why only in some ways? Well, let’s look at the people it was supposed to benefit. It was supposed to benefit those in the middle who have been squeezed so heavily in recent years – the wealthy didn’t benefit at all.
A laudable enough intent no doubt, but of course, the mistake was to fund it by taking the money from the very poor instead of the very wealthy.
Contrast this tax policy though, with the removal of the 60% tax rate in 1988. No pretence, no intention in that other than to make very rich people significantly richer, at the expense of the rest of us – and so it’s gone on unfortunately with far more people now caught in the 40% tax rate than ever were before.
If we look at the measures taken to protect those suffering the effects of the loss of the 10p tax rate, once the tabloid-fuelled uproar had died down, the government made least some attempts to put it right.
I seem to recall that it came to riots before the poll tax was scrapped…
Report abuse