Household bills up. Inflation up. But the overall economic picture may not be so gloomy after all
An extra £88 a month (£1,000 a year): that’s what millions of us are going to have to start paying this “awful April”, as people are calling it, said George Nixon in The Times. It will come in the form of rising bills for energy, phone, water, broadband and council tax.
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The Office for Budget Responsibility reckons the squeeze is so intense that, even allowing for the predicted fall in inflation (now at 10.4%), it expects household disposable income to decline 5.7% by 2025, the biggest two-year drop since 1956.
Companies have seen a ‘week of woe’
The gloomy mood is equally apparent in companies, said the FT. In what has been dubbed “a week of woe”, corporation tax has risen from 19% to 25%, just as most businesses face reduced government subsidies in their energy bills and a 9.7% rise in the living wage.
“Tax up, energy bills up, employment costs up, inflation up – but the Government is oblivious and now running out of road to make a difference,” said Craig Beaumont of the Federation of Small Business.
Thousands of small companies are in danger. Fortunately, the economic picture looks rather more nuanced, said Larry Elliott in The Guardian.
‘The economy may finally be recovering’
Not only do official figures show “the UK performed slightly more strongly than originally thought towards the end of 2022”, but businesses are reporting “a spring surge in order books, boosting hopes the economy may finally be recovering after flirting with recession”.
An Institute of Directors survey shows “a pick-up in growth across all sectors” – suggesting the economy is on course to “confound predictions” made by Chancellor Jeremy Hunt in the recent Budget that output would fall in Q1 2023.
“In spite of efforts to portray the British economy as down and out, it refuses to oblige,” said Alex Brummer in the Daily Mail. It will be fascinating to see if the IMF “revises up its dismal projections” when it issues its spring World Economic Outlook. “It should.”
Inflation is still ‘off the scale’
“Some statistics still have the capacity to shock,” said David Smith in The Sunday Times. One such was the latest reading for “food inflation”, which jumped by 18.2%, year-on-year, in February.
That rise, over 12 months, is as much as “the cumulative increase over the previous 11 years”, showing how “off the scale” current rises are. Central bankers tend to look at “core inflation”, which excludes energy and food, and is currently running at 6.2%.
But it is overall inflation that matters to people and businesses – “and when it is driven by energy and food, it is painful”.
The Government has set a target of halving inflation by the end of the year. If this happens while food inflation remains in double figures, “it will be seen by voters as the most pyrrhic of victories, and a sign that the cost of living crisis is far from over”.
