The 3.5% Inflation Spike is All on Reeves

This morning’s unexpected spike in inflation to 3.5%, up from 2.6% last month, is all on Rachel Reeves and her economically illiterate tax rises and broader economic policies, says Ross Clark in the Spectator. Here’s an excerpt.

There is no positive spin to be put on this morning’s inflation figures, which show the Consumer Prices Index (CPI) rising from 2.6% to 3.5% in a single month. If you want to do the trick of stripping out energy and food prices to arrive at so-called ‘core’ inflation (how you can have a cost of living index which excludes two of the biggest costs faced by households defeats me) the picture is even worse – core inflation is even higher, at 4.5%.

If you want to use the Government’s preferred measure, CPIH, which includes an element of housing costs, then that too is higher than CPI, at 4.1%. Housing costs, energy costs, food, transport – all are going up – with just a small drop in prices of clothing and footwear, and furniture. Top of the list for price increases, unsurprisingly, is education. Private schools have jacked up their fees for the new term as a result of the introduction of VAT on school fees.

Last month, the CPI came in surprisingly low, giving Rachel Reeves an unexpected boost. March’s figure, however, is now looking like a downwards blip. What is so damaging to the Chancellor is the clear link between inflation and her policies. Many businesses have warned that they would have to increase prices in reaction to the increase in Employers’ National Insurance (NI) – and so they have.

The NI changes are particularly harsh on businesses which employ large numbers of part-time workers: the threshold at which NI becomes payable has fallen from £9,200 to £5,000, drawing many more people into the net. It just so happens that many of the businesses which do rely on part-time workers – namely retailers – have direct influence over prices paid by consumers.

The Bank of England has been useless again, notes Ross. Just as in May 2021 it predicted inflation wouldn’t go above 2% before it shot up to 11%, the bank’s Monetary Policy Committee cut rates again this month ahead of the new inflation spike. So much for the ‘experts’.

Worth reading in full.