Inflation data is out this morning. As everyone who knew anything already knew would happen, inflation has increased. The Office for National Statistics has said:
- The Consumer Prices Index (CPI) rose by 2.3% in the 12 months to October 2024, up from 1.7% in September.
- On a monthly basis, CPI rose by 0.6% in October 2024, up from being little changed in October 2023.
- The largest upward contribution to the monthly change in both CPIH and CPI annual rates came from housing and household services, mainly because of electricity and gas prices; the largest offsetting downward contribution came from recreation and culture.
- Core CPI (excluding energy, food, alcohol and tobacco) rose by 3.3% in the 12 months to October 2024, up from 3.2% in September; the CPI goods annual rate rose from negative 1.4% to negative 0.3%, while the CPI services annual rate rose from 4.9% to 5.0%.
So, the government's failure to regulate gas and electricity prices in a way that guarantees massive and exploitative profits for the energy companies at cost to the people of this country is now leading to inflation and, in turn, will result in interest costs remaining high for too long, meaning that the misery will go on, and on, and on.
What we have is a system designed to perpetuate that misery as a consequence of failed regulation that is totally informed by neoliberal dogma, and apparently, no one has the wit to break this cycle.
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Thank you for a most relevant article.
Wit or wish to break this cycle?
Might we be experiencing a form of ideological blindness?
Might the current Labour leadership be much more concerned with obedience than lateral discussion?
Absolutely spot on.
While Labour asks everyone to focus on GB Energy (an investment vehicle), it has done precisely nothing, even to address the phoney energy market that is creating new levels of poverty and distress in Britain, will harm the health of our poorest children, and lead to the avoidable death of pensioners who have been deprived of the WFA. One third of all those elderly deprived of WFA, but entitled to benefits will not claim them. Labour knows spending money on advertising will not change this. They know how to fix this. They know means testing is an evil; it has always been held in contempt, most of all by those who would benefit from it. For them it is a reminder of history, and it is demeaning. For those of us who have never been in the position to need it, it is of course all to easy to ignore the deep sense of resistance; that will lead people to prefer to suffer. Labour know this, from their own history. They are culpable for the consequences this winter. It is already abnormally cold for this time of year. There are no excuses. Labour have wasted three months and done nothing about the energy market; when it should have been a matter of the first order of importance.
Indeed – this cold spell is going to unravel Labour’s policy on winter fuel as much as Covid helped to unravel what the Tories had been doing to the NHS.
More trenchantly perhaps, it will be how quickly ordinary people’s lives will unravel as a result of this unwise, cruel and in reality totally unnecessary policy will do.
This is what you get when we think that ex-private bankers and business thinking is superior to the domain knowledge actually needed to manage and budget for public services.
Yes, this question of regulation of prices is an interesting one.
I think what the latest cost of living crisis has exposed, is that most of the “greedflation” that we experience, is in those things that we need the most, and it continues.
This increase in cpi, is only the tip of a very cold iceberg when it comes to real “need” inflation.
Housing, mortgage and rents, gas and electricity, water, travel costs, and of course, food prices.
You could also add in telecoms/broadband costs, a modern day “need” for most of us. Most of the telecoms companies now increase their bills by cpi/rpi + 3.6% annually. Where’s the competition? And the regulator does nothing!
The knock on effect of greedflation rises in these need items is that people have less to spend on the wider economy, they cut back on discretionary spending elsewhere.
I saw a recent poll on how people would pay for their water bills if the polluting water companies get away with their proposed massive increases over the next five years. 47% said they would spend less elsewhere.
No wonder, every other shop in the city centre where I live is boarded up and closed.
And I’m not sure that simply paying people more is the answer to greedflation, because a lot of people still get left behind. Average pay tends to be distorted by those who are above the average. The vast majority earn a lot less than the average.
So, is there a case for regulation of price increases in certain areas of the “need” side of the economy?
Could it work?
I noticed today that the litre of milk I paid £1.00 for last week is now £1.15. 15% inflation on an (for me) essential item.
I have already decided that, if, sorry, when my water bill goes up I will continue to pay only what I currently pay. If I can afford to.
Is it just me that notes the inflation figure went down (was manipulated down?) for the end-of-September Statement before again rising? NOTE: I haven’t checked, but my memory suggests this is a common pattern.
Why do I find it interesting enough to note September’s figure each year?
The inflation figure at the end of September is the figure used to increase benefit payments for the next financial year.
Quite so. 2.2% in August and 2.3% in October suggests that 1.7% for 12 months to September is somewhat anomalous…
Not just benefits – public sector pensions too.
@ Roy S Grey
You’re so right. I’m an old-style pensioner with a Teacher’s Pension and a Civil Service Pension (and incidentally hit by fiscal drag as well).
It always looks suspicious to me!
Anne
I raised that very point on a post here when the September figures came out!
@ Cyndy Hodgson
Good points always bear repeating, even / especially if in different contexts, as long as they are relevant.
“the government’s failure to regulate gas and electricity prices in a way that guarantees massive and exploitative profits …” applies equally well if we replace ‘gas and electricity’ with ‘water’ and then add ‘while failing to require proper treatment of waste and investment in water security’.
Former Conservative Defence Secretary, Liam Fox, has written a book entitled ‘The Coming Storm. Why water will write the 21st century’. It’s comprehensive and disturbing.
He provides abundant reasons for us to consume less water just as, from a climate and ecology point of view, it would be wise if we each used less gas and electricity. In each case, the practice of standing charges plus price per unit, stresses poor people who use little, but gives no incentive for more extravagant consumers to be frugal.
Fox spoke in Dorset recently. At the end of his talk I suggested that standing charges should be abolished (at which he called out ‘they are a scam’). I proposed ‘low costs per unit for enough usage so that poor people can meet basic needs – with unit costs progressively higher for higher usage.’ He agreed with the proposal but not wholeheartedly.
As I bought his book afterwards (It’s good) I asked him how likely it would be for these ideas to reach the statute book. Disconcertingly, he said that ‘No government would provide the capital’. In other words, while advocating ‘urgent action’ he insisted that it couldn’t be done … because of the grip of neoliberalism … I suppose.
My newly elected Lib-Dem MP was there. As he left the theatre, he said ‘Good question’. I have written to him and included some relevant text from your glossary. Are the Lib-Dems as neoliberal-committed as Tory and Labour?
Thanks
The problem with the Lib-Dems is less neoliberalism than their endemic inability to stand up for anything, or to anything. The inability of the leadership to see through Jeremy Thorpe; David Steele’s disastrous mishandling of the Cyril Smith scandal; Nick Clegg succumbing meekly, and needlessly to neoliberal austerity, for office- rather than an effective but limited ‘confidence and supply’ agreement, giving real political leverage; both Jo Swinson and Ed Davey’s weakness and inertia, confronted by the Post Office.
This is not an impressive record of leadership, or of independence of mind, scepticism, or rigorous and challenging investigation.
“…it would be wise if we each used less gas and electricity. In each case, the practice of standing charges plus price per unit, stresses poor people who use little, but gives no incentive for more extravagant consumers to be frugal.”
Yes, this has become an energy poll tax.
For example, in the property that I rent, I hardly use the gas at all. I estimate that 90% of my gas bill is standing charge. If it were down to me, I would have it disconnected, but I rent, so I have no say. The standing charge is supposedly to pay for the upkeep of the network. I assume most of it goes to the National Grid, who since privatisation make very large profits every year. If there was just one price for gas and electricity, it would encourage people to save.
And I just read on the BBC.
Some £3.7bn is collectively owed to energy suppliers from people unable to pay their gas and electricity bills.
https://www.bbc.co.uk/news/articles/ce8yp69n6z3o
Thanks
Neoliberalism and neo-classical capitalism, despite what they say, are designed to maximise profits for shareholders.
That is why we have the highest energy prices and rail fares in Europe, by quite a long way.
Profits are put before people and their welfare and health.
On the other hand, public services are designed to minimise costs.
That is why we used to have free NHS dental care, energy, and train fares so low, that I never needed to consider them.
There also used to be free higher education, which still made a net benefit to the public good.
I don’t care what companies charge for their takeaway coffee and fancy cars, they are a choice.
Energy, rail and bus travel, homes and healthcare are a necessity, and should not be profited from.
Much to agree with
Maximizing the share price is only done to to increase the CEO’s bonas. When no more money can be extracted from the company then the company borrows money to buy more shares and further increase the CEO’s bonas. Repeat until collapse.
My research with colleagues at Sheffield confirms that
As long as marginal pricing structure continues (price of electricity = price of most expensive generation, that is gas), nothing changes. Labour (Ed Miliband) can say every day till the next General Election, that ‘GB Energy will reduce the price of electricity’, and UK will still pay the most amongst EU countries, if not the world.
Correct
I don’t understand why the published report summarised the data in this way – in the detailed numbers, energy inflation in Oct 2024 was -7.2% (although it went up from -20.7% in Sept but is still negative) whereas housing and rental costs remain positive at 7.4% each and services are at 5.6% (which will be made worse by the recent budget increasing min wage and NI contributions).
Have I misunderstood? Or are the ONS trying to hide the real reasons for inflation?
You have to know the formula that balances these numbers in the overall basket
Your comment is so timely.
I have recently attended two BoE events and challenged them about the ineffectiveness interest rates as the sole tool for tackling inflation, especially when caused by global pricing.
It seem that the stock answer is that they are doing what they are asked to do! If the future is to be different this must be mandated by HM Treasury (Parliament).
I hope your comment will allow government to take a nuanced approach to inflation, which is likely to be with us for some time to the detriment of the young, tenants and those investing in growth.
No the government has not a clue and is in thrall to a neo-liberal mindset. It will just keep repeating “We must take difficult decisions.” What they mean is we don’t understand so its difficult to know what to do!
Sorry, I am not trying to pick holes in your logic, but when you speak of ‘wit’ to do a thing – I have to question – is it not ‘willingness’. I occurs to me that ‘bought and paid for’ is the actual
I think something went missing there…..
Why are you all surprised? This is the only logical outcome of Starmer’s policies, ergo all is going to plan!
Next Tuesday (26th) I’m attending a session at Sheffield Business School, in which Paul Mount, Deputy Agent for the Bank of England for Yorkshire and the Humber, will provide an update on the Bank’s economic outlook for the UK.
(I understand he lives in Sheffield; that he’s had a career in various businesses, investment banking and the like, not just at BoE. And has an MSc in Economics…)
What might be a good question to ask, if there’s any chance to do so?
Something technical about CBRAs and why interest is paid to commercial banks? Or something more timely about inflation and its ‘control’?
I would go for something more direct and less technical.
I would ask how he thinks the Bank of England is supporting the government’s policy that seeks growth. When we had negative interest rates for a period of modern decade growth was limited. Now we have significantly positive interest rates, how can he believe that this will assist growth when it is known that the higher the real interest rate that is paid the lower the level of investment that will occur?
Thanks, Richard.
I’ll see if I can ‘get a word in’..!
Good luck