GUEST BLOG POST FROM RICHARD LYNCH ON INFLATION

Just how bad is UK inflation?

UK inflation is now at its highest level for over 20 years and prices are rising faster here than in almost all of our European neighbours and global competitors. The figures for the year to end September 2011 (with August figures in brackets) show the following increases, together with some frightening underlying increases:

Retail Prices Index (RPI) – 5.6% (5.2%)

RPI excluding mortgage interest (RPIX) – 5.7% (5.3%)

Consumer Prices Index (CPI) – 5.2% (4.5%)

The main reason for the rise in the RPI was an 18.8% increase in the cost of fuel and light, which included a 28.2% increase in the cost of domestic oil and other fuels, a 22.4% increase in the cost of gas and a 12.9% increase in the cost of electricity. Other reasons for the higher RPI included increases in the cost of tobacco (13.1%), clothing and footwear (11.1%), motoring expenditure (8.7%), fares (8.5%) and food (6.9%). Leisure costs, however, had a negative effect on the figures and cost of leisure goods actually fell by 2.4%.

The main reason for the rise in the CPI included increases in the cost of gas (13%), alcohol and tobacco (10%), transport (8.9%), electricity (7.5%) and food (6.4%).

The RPI is now at its highest point since June 1991, when John Major was Prime Minister, and it has been at or above 5% on ten occasions in the year and a half since the coalition took office. By way of comparison, it only reached or exceeded 5% on four occasions during the 13 years of the previous Labour government. The CPI is also abnormally high and its current level of 5.2% has never been exceeded since the index came into existence.

This CPI figure is also higher than comparable figures in Ireland (1.3%), France (2.4%), Germany (2.9%), Greece (2.9%), Spain (3%), the EU as a whole (3.3%) and Italy (3.9%). In fact only one EU country has higher CPI inflation than the UK – Estonia at 5.4%. The difference is even more extreme when we look at non-EU competitors, including Japan, which has zero inflation and the US, which has 0.3% inflation – 17 times lower than our figure!

And what we thought was the one bit of slightly good news, namely that state pensions and benefits would be going up by 5.2% (the September CPI figure) next April, is being questioned. George Osborne, the Minister for Misery, has now announced a review of the link with the September inflation figure and is considering a freeze or sub-inflation increases in these benefits instead!

Richard Lynch is a Dudden Hill resident. He is a retired Unite the Union official and currently conducts voluntary work on employment rights for the Brent Community Law Centre. He also acts as an accompanying representative for the GMB union.

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The Treasury vs Brent Liberal Democrat Sarah Teather

The detail of the Autumn Statement presented by George Osborne on Tuesday reveals some truthful observations on the global financial crisis. It does not blame Labour spending on schools, hospitals and police for creating a financial mess. It says….

1.3 The intensifying euro area debt crisis, driven by excessive levels of debt, now represents the most dangerous threat to the world economy since Lehman Brothers collapsed in autumn 2008. Even if this crisis is resolved quickly, the financial instability and uncertainty it has caused has been a blow to confidence and is damaging the UK economy.

1.4 It has been clear that the financial crisis of 2008 and 2009 reduced the UK’s growth potential relative to the unsustainable pre-crisis trend, but the extent of that loss is uncertain. Most significantly for medium-term growth prospects, the OBR has now substantially revised down its assessment of the level of potential output. That is consistent with evidence from previous financial crises, which have shown large output losses typically persist for many years.

1.5 As a result of these three factors — the inflation shock, the impact of the euro area debt crisis on confidence, and the ongoing structural impact of the financial crisis — the OBR’s November 2011 Economic and fiscal outlook shows that:

  • economic growth has been revised down to 0.9 per cent for 2011 and 0.7 per cent in 2012,
  • with a slower recovery thereafter;
  • the trend level of economic output has been revised down by about 3½ per cent by the end
  • of the forecast period. Comparing the OBR’s trend output projection with an extension of
  • the Budget 2008 projection, trend output will be around 13 per cent below the pre-crisis
  • assumption by the end of the forecast;
  • public sector net borrowing and the structural deficit have been revised up in every year of
  • the forecast as a consequence of the weaker economy; and
  • public sector net debt as a proportion of GDP is forecast to peak at 78.0

HM Treasury: Autumn Statement 2011

So three reasons cited by the Treasury for the country’s economic woes are inflation, which has not been helped by the Tory Liberal VAT bombshell which increased Value Added Tax from 17.5% to 20%, the Eurozone crisis which is questionable because the full impact of a financial crisis usually takes two months to actually affect the day to day running of an economy and the financial crisis which started with the collapse of Lehman Brothers in Autumn 2008.

Compare that to what Brent Liberal Democrat Sarah Teather has blamed the problems of the economy on.

“For years Labour spent more money than the country could afford.”

“It is absolutely vital that we pay back the massive deficit racked up by the last Labour Government”

Liberal Democrat and Brent Central MP Sarah Teather (LINK)

Sarah Teather has criticised public spending by Labour which saying that spending on hospitals, police and schools caused the deficit thereby using this argument to justify making drastic cuts to Brent Council, Brent NHS and Brent’s police force.

Labour’s five point plan for jobs

The Labour Party has developed a five point plan for jobs to get the economy moving again. Lessons of history should have taught us by now that unemployment is not a price worth paying. The unemployment figure is not a statistic but it is the life of an individual and their family affected. That is why it is right that attention is drawn to the lack of activity from this Government in growing the economy and creating jobs for people.

Instead the slash and burn Osbornomics approach is hurting the prospects of economic growth.
Click on image to see the plan on the Labour Party website.

Council Tax freeze trap

People should be aware of the political scheming that goes behind a Government offer for a freeze in Council Tax.

Basically, what the Government agrees to do for one year is subsidise a Council Tax rise. Therefore, although it appears as if Council Tax has been frozen, when that subsidy is no longer there the year after, there will be what appears what looks like a Council Tax rise.

In addition, if a Council finds itself needing to increase Council Tax the year after, there will be an automatic double increase in Council Tax, when in reality all that has happened is a single increase from the year previous added to the removal of a Central Government subsidy to freeze Council Tax.

Councils that wish to freeze Council Tax are therefore much better off if they do so in their own accord and not take up the national Government’s offer of subsidising their Council Tax rise.

Ed Balls on Fuel Duty and VAT

Shadow Chancellor Ed Balls has commented on what the Government can do to help families cope with financial pressures they are facing.

Revolutions in Egypt and Libya have driven up oil prices but there are four things George Osborne can do now.

While he gave banks a tax cut compared to last year, they are now going to pay £800million more than this Government was planning. He should use the extra money to reverse the VAT rise on petrol.

Secondly, he should look at April’s annual fuel duty rise. Labour often postponed planned duty rises when world oil prices were rising.

Thirdly, he must work with finance ministers globally to keep the oil supply flowing and get prices down.

Finally, he must get our economy moving and get more people in work and paying taxes.

Rt Hon Ed Balls MP

VAT rise set to cost the economy 250,000 jobs

These are Nick Clegg’s own figures which he was so keen to highlight before the May 2010 General Election. He even pulled out all the stops with this huge billboard warning against the ‘Tory VAT Bombshell’. Little did we know that a few months later, he would be patting George Osborne on the back as he announced the Tax hike.

“We will not have to raise VAT to deliver our promises. The Conservatives will. Let me repeat that: Our plans do not require a rise in VAT. The Tory plans do, they come with a secret VAT bombshell”.

(Nick Clegg, 28 April 2010)

Now the Lib Dems will be raising VAT to 20%. Ed Miliband has called this VAT rise the wrong tax at the wrong time that will hit people all the time.

National Housing Federation research paints grim picture for young people in Brent

Figures from the National Housing Federation have revealed the grim picture about Housing in Brent.

Brent has the second highest waiting list for households on a waiting list. (behind Newham). The average house price in Brent is £322,904. The Gross income needed for a mortgage is a whopping £83,032.

Bare in mind that this is before the unprecedented rise in tuition fees which makes these figures even worse for young people in the future who want to come onto the housing ladder for the first time.

27% – £98 Million Cuts to Brent Council

Before the elections, we did know that we would have to make £50 million cuts. After the elections, this figure grew in the region of £63 million. The June 2010 Emergency Budget and the Comprehensive Spending Review as well as yesterday’s announcement from Eric Pickles has pushed this up to a massive £98 million plus. We cannot touch Council Tax.

Our Council Budget is around £284 million. Taking £98 million out of a £280 million budget is terrifying when you come to think about it.

Sarah Teather’s ConDem Government’s cuts are deceptive. The Comprehensive Spending Review said that Government cuts were around 19%. However, we in Brent have to make cuts of around 27% over the next four years. This is typical Tory treachery as the difference in the figures show that these cuts are designed to have the face of Local Government plastered across them.

There are Authorities that are less organised than us and to be fair with the previous administration processes that they started setting in motion mean that we have already delivered £10 million in savings. In that sense, we are in a better place than other Boroughs.

The cuts are front-loaded. Next year, we have to make £36.7 million in savings. The One Council programme will deliver £21 million of this which means that we have to somehow find £16 million from somewhere. In 2012 we will have to make further cuts of around £24 million; £14.5 million in 2013 and £23 million in 2014. As you can see, compared to local services, high earners are not even being touched by the cuts.

Brent Council disproportionately impacted by Osborne’s ideological cuts

Following the Comprehensive Spending Review, Brent will not know in detail our precise settlement from Sarah Teather’s Coalition until mid-December.  What we do know is that these cuts will be front-loaded.

To put things into perspective, there are two astonishing facts about Teather’s Government’s cuts.

1.       The average cut that Departments have to make following the Comprehensive Spending Review fall in the region of 19%

2.       Brent Council has to make cuts of 27%

That’s right 27% – making the cuts disproportionately impact on local Councils. Indeed the cuts are designed to have the face of the Local Authority on them when in fact they are stemming from the Coalition Government.

I’ll be blogging more on the cuts in the next few days and weeks ahead.

SCANDALOUS!!!

If anyone had any doubts that these cuts are ideological and out to hit areas most in need this article says it all.

LINK

While Brent is having to make cuts in the region of 27%, areas where deprivation is not prominent such as Tunbridge Wells and West Oxfordshire will see their budgets increase by similar levels. This is not fair. Why should Brent have to pay for Budget increases in richer areas.

Civil servants have realised this but there seems to be no desire from the Treasury to budge on this according to the report.