What is inflation? | Decomplicated
The UK rate of inflation has hit 10.1 per cent, the highest level in 40 years.
The increase was largely down to food prices and staples including toilet rolls and toothbrushes, the Office for National Statistics said.
It is the biggest jump in the cost of living since 1982, when Consumer Prices Index reached 10.4 per cent, according to ONS estimates.
It is also a massive jump from the 9.4 per cent inflation in June.
Tory leadership rivals Liz Truss and Rishi Sunak have faced calls to take urgent action to help tackle the cost-of-living crisis, even as No 10 ruled out any co-ordination between Boris Johnson and his two would-be successors for immediate solutions.
Mr Sunak’s campaign hit out at his rival on Tuesday, urging her to “come clean” on her cost-of-living plan. Meanwhile, Ms Truss has reiterated her plan to cut taxes for households and said she will reject “sticking plaster” approaches.
What was life like the last time inflation was this high?
Consumer Prices Index (CPI) inflation reached 10.1% last month. It is the biggest jump in the cost of living since February 1982, when CPI reached 10.4%, according to estimates.
Here is what was happening in the country in 1982:
The unemployment rate stood at 10.4%, the highest it had been for 50 years, with three million (one in eight) people out of work.
The basic rate of income tax was 30%, while the standard rate of VAT was 15%.
Margaret Thatcher’s priorities in the early 1980s included tackling inflation, aiming to reduce the amount of money in circulation by cutting spending and raising indirect taxes.
Inflation did start to come down, but not before the UK economy spent the whole of 1980 and early 1981 in recession – hindering support for the Conservative Party.
Mrs Thatcher had been almost three years into her first term as prime minister, but her party was averaging around 31% in the opinion polls, putting it behind Labour (32%) and the Alliance (34%) – a recently formed pact between the Liberal and Social Democratic (SDP) parties.
Large shops had to be closed on Sundays by law, with many shutting for half a day on Wednesdays.
The UK’s gas, electricity, coal and water industries were all public-owned, along with Royal Mail, British Rail, British Airways, British Steel, BP, Rolls-Royce and British Leyland (later known as the Rover Group).
The entire telephone system was also run by British Telecom, which was in public hands, though a licence would later be granted to Mercury Communications to operate the country’s first ever privately run network.
NHS staff went on a three-day strike over pay in September, with nurses campaigning for a 12% pay rise.
In June, miners in South Wales downed tools in support of health service workers.
In April, the Argentine invasion of the Falkland Islands took place, overpowering 80 Royal Marines and local volunteers.
Over a few months, the British forces would fight back and regain control of the territory.
The conflict cost 255 British lives, while about 650 Argentines died.
Sam Rkaina17 August 2022 10:55
People’s Assembly planning series of protests over cost crisis
A campaign group is planning a series of protests in the coming weeks to call on the Government to take urgent action to tackle the cost-of-living crisis.
The People’s Assembly said it is mobilising the “biggest, most united” voice of workers and communities from every corner of Britain.
A demonstration will be held outside the Conservative Party’s annual conference in Birmingham in October, followed by a national event in London in November.
Next year marks 10 years since the founding of the People’s Assembly by thousands of trade unionists and community campaigners.
In the past decade, it has organised hundreds of marches, protests, rallies and meetings in towns and cities across England, Scotland and Wales.
The group is calling for utilities to be nationalised, company profits to be cut, and “anti- union” laws to be scrapped.
A spokesman said: “As the Tory Government prepares to ram through even more draconian anti-union laws to prevent workers taking action to defend themselves from ‘fire and rehire’ and the cost-of-living crisis, we are all facing the fight of our lives.
“Millions of households are already struggling to pay for basics such as food, housing and energy. Average household energy bills are predicted rise to £4,200 a year this winter.
“The Bank of England now officially forecasts economic recession and higher inflation for most of 2023.
“At the same time, we are seeing our incomes fall in real terms and we are living in a time of societal collapse.
“But not everyone is struggling. Energy companies report record profits. Others, including supermarkets, transport firms and landlords are enjoying an absolute bonanza. Their profits and rents come from the pockets of ordinary people who are already struggling – even before winter comes.”
The group also called on people to support the increasing number of strikes, saying they help achieve better pay, raise political consciousness and show what is possible when workers “collectively organise”.
Sam Rkaina17 August 2022 10:45
Housing market slowed sharply in June
The average UK house price increased by 7.8% annually in June, slowing sharply from 12.8% in May, according to official figures.
The Office for National Statistics (ONS) said the average house price was £286,000 in June, representing a £20,000 increase against the same month last year.
In England, average house prices increased by 7.3% to £305,000 over the year.
In Wales, the average prices grew 8.6% to £213,000, while in Scotland prices rose 11.6% to £192,000 and in Northern Ireland, they rose 9.6% to £169,000.
Sam Rkaina17 August 2022 10:35
Cost crisis is ‘once in 40 year situation’
Conservative MP John Glen, who is backing Rishi Sunak in the leadership race, said “we are in a once-in-a-40-year situation” with today’s rise in inflation.
The former Treasury minister told BBC Radio 4’s Today programme: “It is obviously a very significant concern for the economy and most of all for those on fixed incomes.
“And my major concern is how we’re going to support the most vulnerable, particularly pensioners who won’t be able to earn more money.”
He added: “We need to know what Liz Truss is going to do because what we’ve heard so far is a lot of confusion, frankly, not an inclination to do any more handouts, lots of tax cuts that won’t affect pensioners, but will have a significant effect if they’re unfunded on the economy and inflationary pressures.”
Sam Rkaina17 August 2022 10:25
‘Captain’ Boris Johnson ‘is on shore leave’ during crisis
Boris Johnson is facing criticism for a lack of action while holidaying as rising food prices pushed inflation to another 40-year high.
Asda chairman Lord Rose criticised a “horrifying” absence of fresh support, saying: “The captain of the ship is on shore leave – nobody is in charge at the moment.”
The Conservative peer questioned when an emergency budget will be brought forward as he warned that “inflation isn’t sitting there waiting for us” as the cost-of-living crisis deepened.
Official figures from the Office for National Statistics showed on Wednesday that the Consumer Prices Index measure of inflation reached 10.1% last month.
The increase was largely attributed to a spike in food prices and staples including toilet rolls and toothbrushes.
Criticism of Mr Johnson mounted as No 10 refused to say whether he will spend his last weeks as Prime Minister living at his grace-and-favour home, Chequers, during the Tory leadership contest.
He was spotted holidaying with wife Carrie Johnson in Greece after their honeymoon to Slovenia, and his final months in post have also included a Typhoon fighter jet trip and a belated wedding party in the Cotswolds.
Lord Rose, a former chief at Marks & Spencer, told BBC Radio 4’s Today programme: “We’ve got to have some action. The captain of the ship is on shore leave – nobody is in charge at the moment.”
Sam Rkaina17 August 2022 10:15
People urged not to turn off fridges
Dame Jenny Harries, chief executive of the UK Health Security Agency, urged people not to turn off their fridges to save money on energy costs.
Asked about people heating their homes during the cost-of-living crisis, she told BBC Radio 4’s Today programme: “I think one of the important things here is people recognise the importance of spending what will likely be for many people very limited resource on heating, because that is an essential part of their health.
“We’re very aware of this, and I think I’ve heard anecdotally, for example, people turning off fridges – clearly that creates the risk of infection in food.
“So it is really important people keep their fridges on and keep their heating on, particularly at the extreme ages of life.”
Sam Rkaina17 August 2022 10:05
ONS explains inflation rise
ONS chief economist Grant Fitzner said: “A wide range of price rises drove inflation up again this month.
“Food prices rose notably, particularly bakery products, dairy, meat and vegetables, which was also reflected in higher takeaway prices.
“Price rises in other staple items, such as pet food, toilet rolls, toothbrushes and deodorants, also pushed up inflation in July.
“Driven by higher demand, the price for package holidays rose, after falling at the same time last year, while air fares also increased.
“The cost of both raw materials and goods leaving factories continued to rise, driven by the price of metals and food respectively.”
Sam Rkaina17 August 2022 09:55
Iceland offering ‘microloans’ to help shoppers
Iceland managing director Richard Walker has discussed the supermarket chain’s new interest-free “microloans” scheme to help shoppers with rising inflation.
In an interview with Sky News, he said: “Yeah, so it’s something we have been trialling for the last 18 months. These are affordable microloans that are very time-limited and small amounts – anything from £25 up to £75.
“You repay a set amount of £10 a week and there’s no interest; we will pay the interest on the borrower’s behalf.
“We’ve partnered with a charity-owned not-for-profit called Fair For You, an ethical lending provider, and they are assessing people who are struggling to make ends meet – as you said, there’s plenty of those around at the moment.
“And, if they’re successful in their application, they’ll get a pre-loaded Mastercard that they can spend in an Iceland shop.”
Sam Rkaina17 August 2022 09:45
Javid says British workers ‘among hardest working in world’
British workers “are amongst the hardest-working in the world”, Conservative former cabinet minister Sajid Javid said.
Asked about Tory leadership contender Liz Truss’s claim that British workers need to produce “more graft”, he told Sky News: “That comment, as I understand it, was made a number of years ago; I don’t know the exact context that was made in.
“What I also heard her say, just in that snippet that you played there, was that the productivity in the UK versus other comparable countries is generally lower and that’s been a longstanding UK problem and that doesn’t happen because British workers don’t work hard; British workers are amongst the hardest-working in the world.”
He added: “I think what she’s talking about is business and investment, because to increase productivity the Government of course has a huge role to play – there’s capital investment, things like infrastructure investment, for example, those areas that get more of it generally of course can do better in terms of productivity.
“It’s also about skills investment and making sure that we’re investing in skills across the country, not just in the capital or the South East but right across the country, and that is what’s going to make the difference, and Liz has a plan for that.”
Sam Rkaina17 August 2022 09:35
Shadow chancellor says families ‘worried sick’ about making ends meet
After inflation soared in July, shadow chancellor Rachel Reeves said: “We must get a grip on rising inflation leaving families worried sick about making ends meet.
“Labour’s fully-costed plan to freeze the energy price cap will bring inflation down this winter, easing the burden on households and businesses.
“And it will mean that households won’t pay a penny more for their energy bills this winter.
“People are worried sick and, while the Tories are busy fighting and ignoring the scale of this crisis, only Labour can give Britain the fresh start it needs.”
Sam Rkaina17 August 2022 09:25