UK inflation hits 9% with more to come
The UK economy is in a state of devastation. Millions of people are using foodbanks, pensioners can’t afford to heat their homes, and families are going hungry.
BoE expects “apocalyptic” food price rises
That sounds bad enough, but there is far worse to come. On Monday, Bank of England Governor, Andrew Bailey, described the outlook for food prices as “apocalyptic”.
Headlines like that are often considered to be either clickbait or doom and gloom. But the apocalyptic outlook message is coming from the head of the Bank of England (BoE). He’s the type to play down any economic downturn. If he’s suggesting it’s going to get worse, you can be sure it will.
Inflation hits 9% with more to come
Inflation figures released today show that inflation is running at 9%. The BoE expects it to rise to 10.25% later this year. But here’s the thing — the BoE has got inflation forecasts wrong for the last few years. If they’re expecting 10.25%, maybe we should expect 15–20%. Let’s hope that they’re right for once.
April is the month that pensions and benefits and upgraded in the UK. Last month pensioners and others that receive various benefits were given a 3.1% rise. With inflation at 9%, this is effectively a 5.9% cut in their income.
Pensioners forced to choose between heating and eating
Many pensioners in the UK rely on their state pension to survive. Their pension is worth 5.9% less than last year. If that wasn’t enough, energy prices rose 54% last month.
Many are having to choose between eating and heating.
And now they have the BoE claiming that food prices rises will be apocalyptic. These poor pensioners are being driven into poverty.
Interest rates are pitifully low
For those that can save, interest rates are currently around 0.5%. Put your money in a typical UK savings account and it will be losing 8.5% a year. And that’s for now. This will get much worse.
Blame the war in Ukraine
The BoE and government like to blame the war in Ukraine for all of this. It obviously plays a part, but inflation was high even before the war started.
Don’t mention Brexit
One issue that tends not to be mentioned by the government is Brexit. It caused a big hit to the economy and still does. Boris Johnson’s claimed his Brexit agreement would mean the UK would be £350 million better off, The reality is that it’s worse off.
The agreement that Johnson claimed was pretty perfect is reportedly costing Northern Ireland almost £1 billion a year. The government also put on hold checks on imports from the EU because they would cost businesses and consumers an extra £1 billion a year.
They portrayed this as saving us poor consumers money, but it’s not. There was never a cost. The new costs are a direct result of Brexit.
High borrowing and high debt
Then we have the massive borrowing from 2008 onwards to content with. Again, this is rarely mentioned.
Covid has increased government borrowing and debt. Billions have disappeared either in fraud or government incompetence.
The recent China shutdowns are impacting supply chains, so that’s another cost. It’s also a useful scapegoat for the government.
Sure, there are some real issues to deal with, but much of this fiasco is directly related to government and BoE incompetence.
Even a former BoE governor, Lord Mervyn King, has claimed that the BoE has made some serious mistakes. Lord King claims that the bank’s money printing spree during the Covid pandemic is what’s mainly fueling prices rises.
Time to admit to their mistakes? No chance.
Will they admit their mistakes and change course. No, they’re not going to do that.
A recession is now a racing certainty. Everyone will need to cut back on discretionary spending. That means that economic activity will fall. That means we’ll all be worse off. The government will do its best to keep wage rises low. That means it will be many years before we recover.
Tax thresholds are frozen until at least 2026. That is equivalent to annual tax rises. Instead of being honest and raising taxes, the government is raising taxes by stealth and hoping no one notices.
This is just the beginning. Buckle up. It’s going to be a wild ride over the coming years.
How To Survive This Crisis?
There are things that we can do as individuals to survive the crises. The following articles have advice on how to spend less and earn more.