Yahoo Lifestyle Inflation news – live: Rate jumps unexpectedly as outlook for government finances ‘still grim’
Inflation rose unexpectedly in February, hitting 10.4 per cent with food and drink prices again driving the rise, the Office for National Statistics said.
The latest Consumer Price Index rate was up from 10.1 per cent in January, reversing the downward trend of recent months. Most economists were expecting CPI to fall to 9.9 per cent in February.
The outlook for the government’s finances remains “still pretty grim” despite improved forecasts from the UK fiscal watchdog, economists have told MPs ahead of an update on inflation.
The new figures are expected on Wednesday morning.A panel of experts told Parliament’s Treasury Committee that households are facing a “two-year living standard squeeze” as a result of higher energy bills and tax rises.
The Office for Budget Responsibility (OBR) has further anticipated a 5.7% decrease in real households’ disposable income per person between 2022/23 and 2023/24.
According to Ipsos’s latest poll, the cost of living remains the public’s overwhelming priority. Though March’s figures have come down since its peak in August 2022, 39% of respondents confirmed that it remained their largest concern.
Key Points
Inflation hits 10.4% in shock rise
Outlook for government finances ‘still pretty grim’, economists warn MPs
All of the benefits, pensions and cost of living payments going out in March
Inflation jumps unexpectedly after dropping for two consecutive months
07:33 , Liam James
Inflation rose to 10.4 per cent last month in a reversal of recent trends, official figures show. The rate of Consumer Prices Index inflation rose to 10.4 per cent in February from 10.1 per cent in January, the Office for National Statistics (ONS) said.
The news comes as economists have warned the UK government that Britons are facing a “two-year living standard squeeze” as a result of higher energy bills and tax rises.
The Office for Budget Responsibility (OBR) added that people are expected to face the biggest fall in living standards on record, with real households’ disposable income per person due to tumble 5.7% between 2022/23 and 2023/23.
Eleanor Noyce follows the ONS announcement:
Inflation jumps unexpectedly after dropping for two consecutive months
Hunt: Falling inflation isn’t inevitable
07:24 , Katy Clifton
Chancellor Jeremy Hunt said that “falling inflation isn’t inevitable”, following the latest inflation figures.
“Falling inflation isn’t inevitable, so we need to stick to our plan to halve it this year,” he said.
“We recognise just how tough things are for families across the country, so as we work towards getting inflation under control we will help families with cost-of-living support worth £3,300 on average per household this year.”
Inflation driven by alcohol prices in pubs and restaurants
07:24 , Katy Clifton
After revealing that Consumer Prices Index inflation hit 10.4% in February, ONS chief economist Grant Fitzner said: “Inflation ticked up in February, mainly driven by rising alcohol prices in pubs and restaurants following discounting in January.
“Food and non-alcoholic drink prices rose to their highest rate in over 45 years with particular increases for some salad and vegetable items as high energy costs and bad weather across parts of Europe led to shortages and rationing.
“These were partially offset by falls in the cost of motor fuel, where the annual inflation rate has eased for seven consecutive months.”
07:23 , Katy Clifton
The rate of inflation rose unexpectedly to 10.4% in February from 10.1% in January, the Office for National Statistics said.
How was life in the UK in 1982 – the last time inflation was this high?
06:00 , Eleanor Noyce
In July 2022, Consumer Prices Index (CPI) inflation reached 10.1%.
It marked the biggest jump in the cost of living since February 1982, when CPI reached 10.4%, according to estimates.
Here is what was happening in the country in 1982:
– Economy
The unemployment rate stood at 10.4%, the highest it had been for 50 years, with three million (one in eight) people out of work.
The basic rate of income tax was 30%, while the standard rate of VAT was 15%.
– Business
Large shops had to be closed on Sundays by law, with many shutting for half a day on Wednesdays.
The UK’s gas, electricity, coal and water industries were all public-owned, along with Royal Mail, British Rail, British Airways, British Steel, BP, Rolls-Royce and British Leyland (later known as the Rover Group).
The entire telephone system was also run by British Telecom, which was in public hands, though a licence would later be granted to Mercury Communications to operate the country’s first ever privately run network.
How was life in the UK in 1982 – the last time inflation was this high?
What is inflation?
05:00 , Eleanor Noyce
The Bank of England (BoE) defines inflation simply as a term used by economists to “describe the increase in prices over time”.
Rising costs in goods and services on the UK high street indicate that the value of the British pound is in decline, which in turn means a reduction in consumers’ purchasing power and therefore their quality of life, as they are discouraged from spending more than they can afford.
This in turn eats into national economic growth.
“A healthy economy needs to have a low and stable rate of inflation,” the central bank explains. “The government sets a target for how much prices overall should go up each year in the UK. That target is 2 per cent. It’s the Bank of England’s job to keep inflation at that target.
“A little bit of inflation is helpful. But high and unstable rates of inflation can be harmful. If prices are unpredictable, it is difficult for people to plan how much they can spend, save or invest.”
The BoE sets monetary policy to exert control and prevent such situations arising, primarily through managing interest rates.
In Britain, inflation is measured monthly by the Office for National Statistics (ONS), which checks the price of 700 typical goods and services that UK consumers regularly spend money on, from bread and milk to cars and foreign holidays.
The total price of a “basket” of such items is calculated to give us the Consumer Price Index (CPI), which is compared to its equivalent a year earlier to reveal how much the rate of inflation has risen over the past 12 months.
UK to avoid recession but Britons face biggest fall in living standards – OBR
04:00 , Eleanor Noyce
In case you missed it...
The UK economy is set to avoid a recession but people are still expected to face the biggest fall in living standards on record, according to the fiscal watchdog.
The Office for Budget Responsibility (OBR) projected that the economy will shrink by less than expected and inflation will fall more sharply than previous forecasts, in an improved economic outlook in the near term.
Declining wholesale energy prices and cooling global inflation have improved the position of the Treasury compared with the last budget statement in November.
Previously, the OBR said the UK was due to enter a recession in 2022 and shrink by 1.4% in 2023.
Henry Saker-Clark reports:
UK to avoid recession but Britons face biggest fall in living standards – OBR
Childcare costs to energy bills support: What was announced in Jeremy Hunt’s Budget?
03:00 , Eleanor Noyce
In case you missed it...
Jeremy Hunt promised a major expansion in state-funded childcare in Budget measures aimed at boosting economic growth.
The chancellor said a recession would be avoided and inflation would fall dramatically as the economy was “proving the doubters wrong”.
In an effort to remove barriers to work, he promised up to 30 hours a week of free childcare for eligible households in England with children as young as nine months, expanding the current policy.
Mr Hunt also confirmed the energy price guarantee will remain at £2,500 until June.
Watch here:
What was announced in Jeremy Hunt’s 2023 Budget?
Workers face extra £29.3bn-a-year burden from ‘stealth’ tax rises
02:00 , Eleanor Noyce
Workers have been warned they will be handing over an extra £29.3bn a year in five years’ time as millions more are dragged into paying tax or higher rate taxes for the first time.
Chancellor Jeremy Hunt decided in his Budget to freeze personal tax thresholds in cash terms, rather than increasing them in line with inflation.
This creates “fiscal drag” – when taxpayers are effectively brought into new tax brackets as their pay and inflation increase.
The number of taxpayers in the higher-rate band will jump by 47 per cent, according to financial watchdog the Office for Budget Responsibility.
“Based on our latest forecasts for earnings growth and CPI inflation, these measures are expected to generate 3.2 million (9 per cent more) new taxpayers, 2.1 million (47 per cent more) new higher-rate taxpayers, and 0.35 million (47 per cent more) additional-rate taxpayers by the end of the forecast than would have been had the thresholds continued to be uprated with inflation,” the OBR experts say in their Budget commentary.
Jane Dalton reports:
Workers face extra £29.3bn-a-year burden from ‘stealth’ tax rises
Bank turmoil casts shadow over Europe interest rate decision
01:00 , Eleanor Noyce
European Central Bank President Christine Lagarde said last week that a big interest rate increase was “very likely” at Thursday’s meeting. That was before Silicon Valley Bank collapsed in the U.S. and European bank shares plunged as fears spread of more widespread troubles at a time when banks are adjusting to rapidly rising interest rates.
Markets are watching to see if the ECB will stick to its path of steep rate increases aimed at fighting inflation or dial back to a quarter-point hike.
Lagarde and the ECB have not made a public statement on the recent banking upheaval, including a stock plunge from major Swiss lender Credit Suisse and its move for financing from the Swiss central bank this week. ECB officials typically observe a silent period a week before a rate decision to avoid excessive market swings and speculation based on officials’ comments.
David McHugh reports:
Bank turmoil casts shadow over Europe interest rate decision
April dates for DWP payments, benefits, pensions and cost of living top ups
Tuesday 21 March 2023 23:59 , Eleanor Noyce
As spring finally arrives in the UK after a long and difficult winter, the strain on household finances from exorbitant energy bills should begin to ease in the weeks to come.
The cost of living crisis remains acute but there was some good news for consumers in Jeremy Hunt’s Budget on 15 March, with the chancellor announcing that the energy price guarantee (EPG) – introduced by Liz Truss last September to ensure households paid no more than £2,500 for their electricity and gas, with the government subsidising the remainder permitted by Ofgem’s energy price cap – would be extended for a further three months.
Mr Hunt had been tempted to increase the EPG to £3,000 from 1 April, a considerably less generous offer that would have eased the burden on the state, but ultimately thought better of it.
“High energy bills are one of the biggest worries for families, which is why we’re maintaining the energy price guarantee at its current level,” the chancellor told parliament.
“With energy bills set to fall from July onwards, this temporary change will bridge the gap and ease the pressure on families, while also helping to lower inflation too.”
Joe Sommerlad reports:
April dates for DWP payments, benefits, pensions and cost of living top ups
Martin Lewis warns food bills may never drop down to what they were
Tuesday 21 March 2023 23:00 , Eleanor Noyce
Martin Lewis has warned supermarket bills will never return to what they were - even with inflation gradually decreasing.
The finance expert explained that a lower rate of inflation does not mean that prices are dropping, but rather that they will not rise as fast.
Prices going down would actually be an issue for the economy as it would result in deflation, which can signal an economic downturn and perhaps a recession or depression.
The money saving expert told The Sun: “I don’t think prices are ever going to go back to where they were. If they did, that would cause a problem for the economy as we would get something called deflation.
“The most important thing is that we get inflation down and then, over time, people’s incomes will hopefully catch up. But there are still going to be a tough couple of years ahead for many people.
The cost of living rocketed across the UK during 2021 and 2022. After hitting a 41-year high of 11.1 per cent last October, inflation eased to 10.1 per cent in January but this is still a 10 per cent increase on the previous January’s figure.
My colleague Tara Cobham has the full story:
Martin Lewis warns food bills may never drop down to what they were
Inflation remains public’s priority but concern about immigration rises – poll
Tuesday 21 March 2023 22:00 , Eleanor Noyce
Concern about immigration has risen sharply in the past month but the cost of living remains the public’s overwhelming priority, according to a monthly poll.
One in five people told pollster Ipsos that they thought immigration was one of the biggest issues facing the country in a survey carried out in the first week of March, as the Government was preparing to introduce its Illegal Migration Bill.
That total represents a 75% increase since February, with concern highest among older voters, southerners and the least deprived.
But despite the increase in concern about immigration, inflation remains the public’s number one priority with 39% of people telling Ipsos it was one of their biggest issues.
Read the full story here:
Inflation remains public’s priority but concern about immigration rises – poll
All of the benefits, pensions and cost of living payments going out in March
Tuesday 21 March 2023 21:30 , Eleanor Noyce
This March, many in the UK will still be looking anxiously at their energy bills and thinking twice about switching the heating on.
Ofgem‘s energy price cap – the maximum amount average users can be charged – will drop by a massive 23 per cent £4,279 in January to £3,280 in April in response to falling wholesale gas prices. But campaigners warn that imminent changes to the government support measures, introduced last year to tackle soaring domestic energy costs, mean many could actually end up paying more.
Chancellor Jeremy Hunt has announced that the energy price guarantee – introduced by Liz Truss last September to ensure households paid no more than £2,500 for their electricity and gas, with the government subsidising the remainder permitted by the cap – would be increased to £3,000 from next month.
That is a considerably less generous offering and coincides with a £400 discount introduced by Rishi Sunak a year ago being allowed to elapse. That could leave households £900 out of pocket in total, with a forecast cold snap due this month likely to necessitate having the radiators cranked up for longer.
The UK rate of inflation meanwhile currently stands at 10.1 per cent, keeping the cost of goods on supermarket shelves high, while the Bank of England’s Monetary Policy Committee has raised interest rates to 4 per cent.
Joe Sommerlad details all of the benefits, pensions and cost of living payments going out in March:
All benefits, pensions and cost of living payments coming in March
House sales dip but average fixed mortgage rates hit a six-month low
Tuesday 21 March 2023 21:00 , Eleanor Noyce
House sales fell by nearly a fifth (18%) in February 2023 compared with the same month a year earlier, in signs that the housing market is slowing, according to HM Revenue and Customs (HMRC).
Across the UK, an estimated 90,340 homes were sold in February this year, which was 4% lower than in January 2023.
HMRC’s report said: “Towards the end of last year mortgage and interest rates increased and we are starting to see the impacts of those changes within these statistics.
“Seasonally adjusted residential property transactions appear depressed, indicating a slowing of the housing market.”
The figures were released as financial information website Moneyfacts said average two and five-year fixed-rate mortgages have edged down to their lowest levels in six months.
Vicky Shaw reports:
House sales dip but average fixed mortgage rates hit a six-month low
Outlook for government finances ‘still pretty grim’, economists warn MPs
Tuesday 21 March 2023 20:21 , Eleanor Noyce
The outlook for the government’s finances remains “still pretty grim” despite improved forecasts from the UK fiscal watchdog, economists have told MPs ahead of an update on inflation.
The new figures are expected on Wednesday morning.
A panel of experts also told Parliament’s Treasury Committee that households are facing a “two-year living standard squeeze” as a result of higher energy bills and tax rises.
It comes after Chancellor Jeremy Hunt promised a major expansion in state-funded childcare and tax breaks for businesses in last week’s Budget.
The Government’s official forecaster, the Office for Budget Responsibility (OBR), also confirmed last week that the UK economy is now on track to avoid a technical recession, which means two consecutive quarters of decline.
Henry Saker-Clark has the full story:
Outlook for government finances ‘still pretty grim’, economists warn MPs
Welcome to The Independent’s live blog on inflation
Tuesday 21 March 2023 20:18 , Eleanor Noyce
Good evening, and welcome to The Independent’s live blog on inflation.
Follow for live updates.
