Two sets of figures were released this morning – one generally good news for the nation as a whole, the other spelling more doom and gloom for the Conservative Government under Prime Minister Rishi Sunak. WALTER CRONXITE explains why
The annual rate of inflation finally returned to 2% in May, according to figures released this morning by the Office for National Statistics. But it has taken almost two years for the Bank of England’s grip on borrowing rates to get rising prices back to close to being under control after the brief, but disastrous, period in power of Thick Lizzy Truss and her KamiKwasi mini-budget sent the UK economy into a tailspin.
And that means that the good news on inflation has come far too late to save Rishi Sunak’s Tory Government, which is facing the General Election on July 4.
That’s certainly the case after the latest, large-scale IPSOS poll, published last night, which estimates Labour could win 453 seats on July 4 and the Conservatives 115, with high-profile Tories such as Penny Mordaunt, Jacob Rees Mogg, and Grant Shapps losing their Westminster seats.
The IPSOS poll reckons the LibDems will win 38 seats in the new Parliament, the SNP 15, Reform three and the Greens three.
Expert opinion: Alastair Campbell has recently expressed doubt about election polling
There’s good cause to be cautious (especially for Labour) or sceptical about the polling figures.
“Sorry but these MRP polls are ridiculous,” said Alastair Campbell, played by Peter Capaldi in The Thick Of It, and the man who once said of Inside Croydon, “This is what we call proper journalism” (MRP polls are large volume surveys conducted on a multi-level regression and post stratification model).
The thinking is that while the voting public is still feeling the impact of the cost of living crisis in their pockets and purses, a bit of data from the ONS won’t be enough to change the course of the election.
The release of the inflation figures represents one of the last significant economic indicators before the vote on July 4. If there’s a straw floating by on a passing zephyr, expect your nearest Tory to grasping at it, and cling hold tight.
Few, if any, of the prices of everyday products that soared in the autumn of 2022 have gone down despite the decline in the rate of inflation – prices are still going up, just at a slower rate – and many mortgage holders are paying much, much more every month as a consequence of the interest rate hikes imposed to slow inflation.
A tweet that says a thousand words: the whole of the country has been paying a heavy price for Truss, and Philp’s, government
Some Croydon mortgage holders have seen their monthly repayments double since 2022, when Chris Philp, the Tory candidate in Croydon South, the parliamentary seat he has held since 2015, was Chief Secretary to the Treasury under Truss.
Housing costs, which include mortgage interest payments, property transaction charges and maintenance bills, increased by 6.7% over the past year, up from 6.6% in the 12 months to April. The ONS said it was highest annual rate since records began in 1992.
According to the ONS, private rents rose by 8.7% in the year to May 2024 – meaning rents continue to rise faster than earnings. Headline wage growth is 5.9%.
Housing is not included in the CPI. An alternative index that includes owner-occupier’s housing costs, the consumer prices index including housing (CPIH), also fell, but from 3% in April to 2.8% in May.
Lily Megson, the policy director at My Pension Expert, said today: “With just 15 days until the election, the government will no doubt claim the slowdown in inflation as a victory. But it’s too little, too late for Rishi Sunak.
“The return to the Bank of England’s 2% target is a positive development, but it cannot erase the prolonged financial hardship faced by many households.
“Following last month’s dip in inflation, the Prime Minister claimed it was proof that the plan is working. But the government must recognise that today’s figures do not signal the end of people’s fight for financial security.
“Pension poverty is on the rise. The cost-of-living crisis has made it incredibly challenging for individuals to contribute to their pension pots, leading many towards a difficult, delayed or unattainable retirement.”
‘Too little, too late’: pension expert Lily Megson
And Megson had a warning for Labour leader Keith Starmer and Robotic Rachel Reeves, the shadow chancellor: “The next government will have its work cut out.
“With inflation back at manageable levels, now is the time to help people get back on the path to recovery.”
Andy Mielczarek, the founder and CEO of SmartSave, said: “Finally reaching the target rate of 2% suggests that the Bank of England’s cautious approach to cutting interest rates is working. A year ago, this news would have been cause for celebration. So why does the mood seem so low?
“For one thing, the cost-of-living crisis is far from over, as inflation has proved frustratingly sticky. The cost of essential items and household bills are still dangerously high, and debt repayments continue to weigh on household incomes. No doubt all eyes will be fixed on tomorrow’s interest rate announcement, with many fingers crossed for a cut.”
Inside Croydon columnist Andrew Fisher tweeted this morning that it is “long overdue for the Bank of England to slash interest rates”, although few economists are expecting an interest rate cut as soon as tomorrow.
The figures from the ONS today showed the rising cost of food and beverages eased along with furniture and the price of household goods. But analysts said the high level of core inflation, which excludes volatile items such as food and fuel, would be concerning to the Bank of England.
Mortgage misery: some believe the Bank of England has kept interest rates too high, too long
That core inflation was 3.5% in the 12 months to May, down from 3.9% in April. The rising price of services, which eased from 5.9% to 5.7%, was one of the main factors keeping core inflation elevated.
Service industries have complained that they experienced increased IT and labour costs, which they were forced to pass on to consumers. Average wages excluding bonuses rose by 6% in the three months to the end of April.
Sanjay Raja, the chief UK economist at Deutsche Bank Research, said services inflation was “the key gauge watched by policymakers” and there was a widening gap with the central bank’s forecasts.
“The wedge between the Bank’s projection and actual data widened a little more, adding to concerns that services prices may be a little stickier than anticipated. It will raise the bar for an August rate cut.”
The TUC general secretary, Paul Nowak, said the fall in inflation masked three years when “UK families have suffered the highest price rises in the G7 – with inflation going up more over that period than it usually does over an entire decade”.
The Bank of England’s monetary policy committee, which meets in the City tomorrow, aims to keep inflation at about 2%, but has forecast a rise later in the year back towards 3%, before a fall again next year to 2%.
- HUSTINGS UPDATE: One of the election hustings organised for later this week, the Croydon TUC event in Ruskin House on June 20, has been postponed. Click here for details of Croydon, Streatham, Sutton and Cheam election events going ahead
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According to a Telegraph poll by Savanta about 10 minutes ago, it’s going to be total annihilation and Sunak not even able to save his own seat.
Philp’s a goner too – even without any damage to him by Reform.
(Although, to my eye, the percentages in their Croydon South graphic add up to more than 100, so lawd knows how that works).
Campbell’s scepticism about national polling is well-founded.
Caution about how national polls might not apply in Croydon would be well-placed.
My imperfect, anecdotal survey among (the explicit) Conservatives of my acquaintance is that their antipathy for Labour – local or national – is only exceeded by their antipathy for the Tories.
If they were livid about Croydon Labour, they are white hot about national Conservatism and what they perceive its failures to be.