Inflation up to 2% – but it’s too late to save Sunak’s Tories – Inside Croydon

Two sets of figures were released this morning – one generally good news for the nation as a whole, the other signaling more doom and gloom for the Conservative government under Prime Minister Rishi Sunak. WALTER CRONXITE explains why

The annual rate of inflation finally returned to 2% in May, according to figures released this morning by the Office for National Statistics. But it took nearly two years for the Bank of England’s stranglehold on lending rates to bring rising prices back close to being under control after the brief but disastrous spell in power of Thick Lizzy Truss and her KamiKwasi mini-budget sent to the Kingdom United. economy in a pinch.

And that means the good news on inflation came far too late to save Rishi Sunak’s Conservative government, which faces a July 4 general election.

That is certainly the case after the latest wide-ranging IPSOS poll, published last night, which estimates Labor could win 453 seats on July 4 and the Conservatives 115, with high-profile Tories such as Penny Mordaunt, Jacob Rees Mogg and Grant Shapps . losing their seats in Westminster.

The IPSOS poll sees the LibDems winning 38 seats in the new Parliament, the SNP 15, Reform three and the Greens three.

Expert opinion: Alastair Campbell recently expressed his doubts about the election polls

There is good reason to be cautious (especially for workers) or skeptical about the poll numbers.

“I’m sorry, but these MRP polls are ridiculous,” said Alastair Campbell, played by Peter Capaldi in Her thicknessand the man who once said of Inside Croydon, “This is what we call proper journalism” (MRP polls are high volume polls conducted on a multilevel regression model and post stratification).

The thinking is that while the voting public is still feeling the impact of the cost of living crisis in their pockets and purses, little data from the ONS will not be enough to change the course of the election.

The release of inflation figures is one of the last significant economic indicators before the July 4 vote. If there’s a straw floating on a passing zephyr, expect the nearest conservationist to grab it and hold on tight.

Few, if any, of the consumer goods prices that rose in the fall of 2022 have fallen despite the drop in the inflation rate — prices are still rising, just at a slower pace — and many mortgage holders are paying a lot, much more each month as a result of interest rate hikes imposed to slow inflation.

A tweet that says a thousand words: the whole country paid a heavy price for Truss and Philp’s government

Some Croydon mortgage holders have seen their monthly repayments double since 2022, when Chris Philp, the Tory candidate for Croydon South, the parliamentary seat he has held since 2015, was chief secretary to the Treasury under Truss.

Housing costs, which include mortgage interest payments, property transaction fees and maintenance bills, rose 6.7% over the past year, up from 6.6% in the 12 months to April. The ONS said it was the highest annual rate since records began in 1992.

According to the ONS, private rents rose by 8.7% in the year to May 2024, meaning rents continue to rise faster than earnings. The general salary increase is 5.9%.

Housing is not included in the CPI. An alternative index that includes owner-occupier housing costs, the consumer price index including housing (CPIH), fell but from 3% in April to 2.8% in May.

Lily Megson, director of policy at My Pension Expert, said today: “With just 15 days until the election, the government will no doubt claim the slowdown in inflation as a victory. But it’s too little, too late for Rishi Sunak.

“The return to the Bank of England’s 2% target is a positive development, but it cannot erase the prolonged financial difficulties facing many households.

“Following the drop in inflation last month, the prime minister claimed it was proof the plan was working. But the government must recognize that today’s figures do not signal the end of people’s struggle for financial security.

“Pension poverty is on the rise. The cost of living crisis has made contributing to their pensions an incredibly difficult challenge for individuals, leading many to a difficult, delayed or impossible retirement.”

“Too little, too late”: pensions expert Lily Megson

And Megson had a warning for Labor leader Keith Starmer and Robotic Rachel Reeves, the shadow chancellor: “The next government will have their work cut out for them.

“With inflation back at manageable levels, now is the time to help people get back on the road to recovery.”

Andy Mielczarek, founder and CEO of SmartSave, said: “Finally reaching the 2% target rate suggests that the Bank of England’s cautious approach to cutting interest rates is working. A year ago, this news would have been cause for celebration. So why does the mood seem so low?

“First, the cost of living crisis is far from over, as inflation has proven frustratingly sticky. The cost of essentials and household bills are still dangerously high, and debt repayment continues to weigh on household incomes. All eyes will no doubt be on tomorrow’s interest rate announcement, with many fingers crossed for a cut.”

Inside Croydon columnist Andrew Fisher tweeted this morning that “the Bank of England’s interest rate cut is long overdue,” although few economists expect a rate cut as soon as tomorrow.

Today’s figures from the ONS showed that the rising price of food and drink eased along with the price of furniture and household goods. But analysts said the high level of core inflation, which excludes volatile items such as food and fuel, would be a concern for the Bank of England.

Mortgage mess: some believe that the Bank of England has kept interest rates too high for too long

This core inflation was 3.5% in the 12 months to May, down from 3.9% in April. The increase in the price of services, which fell from 5.9% to 5.7%, was one of the main factors that kept core inflation high.

Service industries complained that they faced increased IT and labor costs, which they had to pass on to consumers. Average wages without bonuses rose 6% in the three months to the end of April.

Sanjay Raja, chief UK economist at Deutsche Bank Research, said services inflation was the “key indicator watched by policymakers” and that there was a widening gap with the central bank’s forecasts.

“The gap between the Bank’s projection and the actual data has widened slightly, adding to concerns that service prices may be a bit tighter than anticipated. It will raise the bar for an August rate cut.”

TUC general secretary Paul Nowak said the fall in inflation masked three years when “UK households have suffered the biggest price rises in the G7 – with inflation rising more during this period than usual over a whole decade”. .

The Bank of England’s monetary policy committee, which meets in the City tomorrow, aims to keep inflation at around 2% but has forecast a rise later in the year back to 3%, before falling again next year to 2 %.

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