Guest Blogpost: Richard Lynch on Inflation

There was a further fall in inflation in February, the latest month for which figures are available, but prices are still rising faster than wages and than in competitor economies.

The figures for the year to end February 2012 (with end January figures in brackets) are as follows:

Retail Prices Index (RPI)                                                                –                              3.7% (3.9%)

RPI excluding mortgage interest (RPIX)  –                              3.8% (4.0%)

Consumer Prices Index (CPI)                                      –                              3.4% (3.6%)

The main downward pressure on the RPI came from price rises in motoring expenditure and fuel and light, while the main downward pressure on the CPI came from domestic electricity and gas, recreation, transport and electrical goods.

Nonetheless there were still upward pressures on both the main indices. For the RPI these included: alcohol and tobacco (6.1%), beef (11.6%), lamb (13.2%), pork (9.1%), butter (10.3%), coffee and beverages (13.7%), electricity (10.1%), gas (17.5%) and vehicle tax and insurance (10.9%). Upward pressure on the CPI included increased costs of fuels and lubricants (5.3%), education (5.1%), jewellery, clocks and watches (8.6%) and transport insurance (11.6%).

UK inflation, as measured by the CPI, is now only the seventh highest in the EU but is above the EU average of 3% and the Eurozone average of 2.7%. It is equal to the inflation rate in Italy but is higher than in France and Germany (2.5%), Spain (1.9%), Greece (1.7%) and Sweden (1%). The UK rate is also higher than that in China (3.2%), the US (2.9%), Switzerland (-1.2%) and Japan (0.5%).

Predictions are that inflation will fall further over coming months but these are likely to be affected by the current record high prices for oil, anticipated higher prices for food, and the increase in the price of postage stamps (by 14p to 60p for first class and by 14p to 50p for second class).

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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Guest Blogpost from Richard Lynch: Sharp fall in January inflation

The latest Office for National Statistics figures show inflation falling sharply in January, as the effects of last year’s VAT increase fell out of the calculations. However, prices are still rising faster than wage increases and faster than in the large majority of competitor economies.

The figures for the year to end January 2012 (and end December 2011) are as follows:

Retail Prices Index (RPI)                                –                       3.9% (4.8%)

RPI excluding mortgage interest (RPIX)        –                       4.0% (5.0%)

Consumer Prices Index (CPI)                                    –                       3.6% (4.2%)

Much of the fall was due to technical reasons, mainly because current prices are now being compared with prices after the VAT increase from 17.5% to 20% last year, rather than prices prior to that increase. The increase in VAT is estimated to have added around 0.76% to inflation figures during 2011 and a fall in the figures was therefore expected when it was no longer a factor in the calculations.

However, there were also other downward pressures on inflation in January with the CPI, for example, affected by lower prices for clothing and footwear, furniture and household goods, due to the new year sales.

But there were upward pressures as well. In the case of the CPI, these included annual increases in the prices of alcoholic beverages and tobacco (6%), electricity (13.2%), gas (18.7%), tools and equipment for houses and gardens (16.8%), air transport (9.6%), jewellery, clocks and watches (8.4%) and transport insurance (15.5%). Upward pressures on the RPI came from increases in the price of biscuits and cakes (10%), beef (11.6%), lamb (16.2%), pork (11.7%), coffee and other hot drinks (15.2%), tobacco (8.8%), electricity (13.2%), gas (19.1%), vehicle tax and insurance (14.2%) and CDs (6.5%).

UK inflation is now no longer the highest in the EU but our 3.6% CPI is still higher than the CPI rate in the Euro Area (2.6%), in the EU as a whole (2.9%) and in 22 of the 27 member countries. These lower-inflation countries include Ireland (1.3%), Spain (2%), Greece (2.1%), Germany (2.3%), France (2.6%) and Italy (3.4%). It also compares badly to CPI rates in Japan (0.1%), Switzerland (-0.9%) and the US (2.9%).

Almost all economists are predicting that inflation will be lower in 2012 than in 2011, but there are mixed views on whether there will be sustained reductions during the year or whether prices will remain stubbornly high. The Bank of England is predicting significant falls by the end of the year, but they have made similar predictions over recent years and they have been consistently wrong. In addition, recent figures showing diesel prices at a record high of 143.7p a litre and petrol prices at a record high of 137.4 p a litre, suggest that there is more bad news to come.

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.

Guest Blogpost from Richard Lynch: Inflation down but still too high

UK inflation fell in December, for the third month in succession, and is now only the third highest in the EU. However it continues to be high by the standards of the past 20 years and is still rising at double the rate of pay increases. The figures for the year to December 2011 (with year to end November figures in brackets) are as follows:

Retail Prices Index (RPI)                                 –        4.8% (5.2%)

RPI excluding mortgage interest (RPIX)          –        5.0% (5.3%)

Consumer Prices Index (CPI)                         –        4.2% (4.8%)

The falls in all the main indices were the result of heavy discounting on the high street during the period around Christmas and falls in prices of food, fuel, clothing and recreation/leisure.

Despite this, there were still some steep price hikes. The CPI figures, for example, showed big year-on-year increases in the prices of oils and fats (13%), coffee, tea and cocoa (9.6%), tobacco (11.8%), electricity (14.1%), gas (19.8%) and house contents insurance (21%). The RPI figures showed many equally high increases, including in the prices of beef (10.6%), lamb (17.5%), oils and fats (14.4%), coffee and hot drinks (12.9%), tobacco (11.8%), electricity (14.1%), gas (19.6%) and vehicle tax and insurance (18.6%).

Overall UK inflation may have fallen in December but it is still high by international standards. In the EU, our 4.2% CPI rate is below the rate in Slovakia (4.6%) and Poland (4.5%) but is well above rates in Germany (2.3%), Spain (2.4%), France (2.7%), the Euro Area (2.7%), the EU as a whole (3.0%) and Italy (3.7%). UK inflation is also higher than in Switzerland    (-0.4%), Japan (-0.2%), the USA (3.0%) and China (4.1%).

Further falls in UK inflation are expected over coming months as reductions in utility prices kick in and the effect of last year’s VAT increase drops out of the annual comparisons.

*The latest Inflation figures are (RPI 3.9%, CPI 3.6%) 

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.

Guest Blog Post: Richard Lynch on the widening gap between pay and inflation

The gap between pay increases and inflation is continuing to widen, according to figures from the pay research organisations and the Office for National Statistics (ONS). The figures for median increases during the three months to end October 2011 (with end September figures in brackets) show the following:

Income Data Services (IDS)-2.3% (2.4%)

Labour Research Department (LRD)-2.5% (2.5%)

XpertHR (formerly IRS)-2.0% (2.0%)

ONS figures for increases in the three months to end September 2011 (with end August figures in brackets) show:

Average total pay (including bonuses)-2.3% (2.8%)

Average regular pay (excluding bonuses)-1.7% (1.8%)

However, the ONS figures for the three months to end October (which are published later than the figures from the pay research organisations) show increases in average total pay falling to 2.0% and increases in average regular pay rising marginally to 1.8%.

None of the above figures go even halfway to matching October’s RPI increase of 5.4% and an average of all the figures shows that pay increases are running at less than 40% of price increases. This means that ‘real pay’ is falling for most people, and falling particularly badly for public sector workers and others experiencing pay freezes at present.

According to XpertHR, pay was frozen for 28% of workers in the three months to end October 2011, compared to 25% for the previous quarter. This situation is likely to continue for public sector workers next year and XpertHR is predicting that 10% of private sector workers will see their pay frozen in 2012 as well. And to add insult to injury, the coalition is now telling public sector workers that pay increases will be capped at 1% from 2013 and, if they succeed in introducing regional pay, millions of nurses, teachers, council workers and others will experience further cuts in their standard of living.

There are no such restrictions in the pay of Britain’s top bosses, however, and a recent report from the High Pay Commission showed that not only has their pay been motoring away ahead of ours, but some have enjoyed increases of up to and above 4,000% in the past 30 years.

Total pay for lead executives in BP, for example has increased by 3,006.5% since 1980 and has increased from 16.5 times’ average pay to 63.2 times’ average pay during that period. In Barclays, the total pay of lead executives has increased by 4,899.4%, with the multiple of average pay increasing from 14.5 to 75. The increase in Lloyds was 3,141.6%, with the multiple increasing from 13.6 to 75. Not bad for companies which have contributed more than most to either ecological or economic disasters over recent years!

Average total pay (including bonuses) is now £463 a week, according to the ONS, with average regular pay at £436 a week. LRD estimates that average full time pay is £618 a week. Average pay for the CEOs of FTSE 100 companies, according to the High Pay Commission, is £80,769 a week (£4.2 million a year). So much for all of us being in this together!

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.

Guest Blog Post: Richard Lynch on UK inflation – now the highest in Europe

The most recent statistics have shown inflation falling slightly but most UK prices are still rising fast and our inflation is now the highest in Europe. The figures for the year to end October 2011 (with end September figures in brackets) show the following:

Retail Prices Index (RPI)-5.4% (5.6%)

RPI excluding mortgage interest (RPIX)-5.6% (5.7%)

Consumer Prices Index (CPI)-5.0% (5.2%)

The modest fall in all indices came largely from falls in the cost of food (due to “significant and widespread discounting by supermarkets” and good harvests for certain produce), air fares and petrol. However, there were also significant upward pressures from increases in the price of clothing, electricity and gas.

Amongst the factors keeping the CPI annual figure high were increases in the prices of fuels and lubricants (15.4%), gas (24.1%), electricity (14.9%) and bread/cereals (6.2%). Factors affecting the RPI included increases in the prices of fuel and light (20.2%), tobacco (13.4%) and motoring (7.7%).

All of this helped the UK continue its climb up the European inflation league and, after passing out Estonia, our CPI has now become the highest in the entire European Union.  Our 5% rate is head and shoulders above the EU average (3.4%) and the Eurozone average (3%). We are also well ahead of competitors like Italy (3.8%), Spain (3%), Germany (2.9%) and France (2.5%). We also have higher inflation than China (4.2%), the USA (3.5%), Japan (-0.2%) and Switzerland (-0.5%).

Who says the coalition is not capable of world-beating performances!

Update: November’s inflation figures have been published since the above article was written. They show the RPI down slightly at 5.2% and the CPI down to 4.8%.

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.

Guest Blog Post: Richard Lynch on why we must have change in 2012

When David Cameron was giving his New Year message twelve months ago, he said that the coalition had pulled Britain out of the danger zone and had laid firm foundations for economic growth and for cutting the deficit. Yet it is now clear that the past year has been a disastrous one for the economy, with growth worse than Gordon Brown achieved when the country was emerging from recession and most economists predicting that a return to recession is likely in the first half of 2012. And as for the deficit, that is now higher than ever and will take longer to reduce than under the Alistair Darling plan which the coalition ridiculed at the time of the general election.

Promises to bear down on unemployment have also fallen flat with 2.64 million people now out of work and 5.67 unemployed people chasing every job vacancy. These are not only higher figures than applied at the worst point of the recession but the highest since 1994 when the Conservatives were last in power. And all the predictions are that there is worse to come, with the Chartered Institute of Personnel and Development (CIPD) expecting an increase to 2.85 million by the end of 2012 and Capital Economics expecting a rise to three million. And the coalition’s own Office for Budget Responsibility, which had predicted that public sector job losses would hit 400,000 by 2016, is now predicting 710,000 such losses by 2017.

Inflation has also been a huge failure for the coalition with the Retail Prices Index rising by 5% or more on 11 occasions in the first 11 months of 2011 (something which happened on only four occasions in the 13 years of the last Labour government). The Consumer Prices Index has not been quite as bad but has averaged 4.5% during the year and is now higher than the CPI in every other EU country, not to mention China, Japan and the USA. And rail fares have just risen by 5.9% on average, giving us the highest such fares in Europe.

Pay increases failed miserably to match inflation in 2011, with the gap between increases in average regular pay and the Retail Prices Index rising from 2.5% at the beginning of the year to 3.4% on the latest figures available. And, according to a recent CIPD survey, only 45% of workers got pay increases in 2011, with 48% having had their pay frozen and 5% having had it cut – worse figures than were ever seen during the recession.

Pensions have also been hit hard, and not only in the public sector (where two million people from 30 unions struck on 30 November – more than took action during the general strike). The Association of Consulting Actuaries recently said that there has been a ‘seismic collapse’ in private sector pension provision, with nine out of 10 private sector defined benefit schemes now closed to new entrants and 25% of companies planning to dispense with such schemes entirely in the next five years. According to other reports, employee participation in occupational pension funds is now at its lowest level since 1956 and 65% of employees have no such pensions and will only have the state pension to look forward to when they retire.

Because of the above and other factors, living standards have fallen sharply in the past year, with poorer families and those with children the worst affected. And all the indications are that this trend will continue, with the Institute of Fiscal Studies predicting that half a million more children will fall into ‘absolute poverty’ by 2015-16. This is not only reversing the fall in child poverty which we saw in recent years but indicates a level of impoverishment which has no precedent in modern times. And living standards are collapsing for older people as well, according to Age UK, with 1.8 million pensioners below the poverty line and local authority care services for the elderly cut by 4.5% in 2011.

While this is happening, the poor are being fleeced by pay-day loan companies like Wonga which can charge interest rates of up to 5,000% a year and by companies running ‘rent to own’ schemes which allow the poor access to cookers, washing machines and other necessities, but at outrageous prices. Pawnbrokers have also been doing a booming business and are making record profits from those who find themselves having to use their services.

The coalition says that all this austerity is inevitable because we have been living beyond our means and that we all have to make sacrifices before we can get back to the good times. Yet Britain is still one of the richest countries in the world (seventh richest according to the most recent assessment) and is awash with millionaires, multi millionaires, billionaires and cash-rich corporations for whom the good times have never disappeared.

These include corporate executives like Mick Davis of Xstrata, who made £18.4 million last year, Bart Brecht of Reckitt Benckiser, who made £17.9 million, Michael Spencer of ICAP, who made £13.4 million and Terry Leahy of Tesco, who made £12 million.

They also include Phil Bentley, CEO of British Gas, whose remuneration package was £4 million last year and Dave Hartnett, the HMRC head who agreed to let Goldman Sachs off interest payments of £10 million, who will be retiring this year with a reported £80,000 a year pension and a cash lump sum of £160,000.  And F1 Chief Bernie Ecclestone has been so untouched by the hard times that he has been able to put £3 billion in a trust fund for his two daughters and reportedly gave £27.5 million to a banker to encourage him not to disclose information about that fund to HMRC. (His daughter Petra lives in a £54 million mansion in LA and had £12 million spent on her wedding. His daughter Tamara lives in a £45 million London mansion which has a spa and massage parlour for her dogs, as well as other features.)

It is because of people like these that income inequality is rising faster in the UK than in any other developed nation, as the OECD recently pointed out in a report called Divided we stand: why inequality keeps rising. That report said that the richest 0.1% of people in the UK own 5% of the country’s wealth, the richest 1% own 14%, and the poorest 30% of people own only 3%. Yet it is the poorest who are affected most by the coalition’s austerity programme!

In his 2012 New Year statement, David Cameron said that he ‘gets it’ when people tell him they are suffering because of job insecurity and rising prices – and it wouldn’t be a surprise if he ‘feels their pain’ as well. But what he doesn’t get is that it is his austerity programme which is destroying the economy, because people who have lost their jobs are not paying taxes to bring down the deficit and people whose living standards are being squeezed are not able to spend on the goods and services which other people are providing; consequently, economic growth is being choked off.

And what some of us are not getting is that there is an alternative to these attacks on our jobs, living standards, the welfare state and our rights at work and that we can turn them back if we stop believing the lies we are being fed and join the growing resistance to coalition and employer austerity policies at work and in our communities in 2012. Let’s do it!

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.

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.