Sunday, December 5, 2021

Rising food and fuel prices could undo any government-promised wage increase

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With the Bank of England expecting inflation to hit 5 percent in the next 12 months, households are likely to feel more, not less, financially pressured

In today’s budget, the Chancellor of the Exchequer confirmed a 6.6 percent increase in the national living wage, from £ 8.91 an hour to £ 9.50. He also announced a cut in the universal credit rejuvenation rate from 63p to 55p – that’s the amount of UC withdrawn for every pound someone earns.

Rishi Sunak may have raised the minimum wage, but rising inflation will make the lives of millions of Britons more expensive.

Mr. Sunak said, “Let’s call what it is: a tax on labor. And a high tax rate too. “

He also agreed to end a pay freeze for the UK’s 5 million civil servants.

However, with the Bank of England expecting inflation to hit 5 percent in the next 12 months, households are likely to feel more, not less, pressured financially.

Earlier this month, Bank of England’s chief economist Huw Pill warned that UK consumer price inflation could hit 5 percent, doubling the UK central bank’s 2 percent target. The Budgetary Responsibility Office confirmed that it expects average inflation to be around 4 percent for the next year.

Inflation is likely to be fueled literally by rising energy costs. Centrica, the owner of British Gas, said the surge in wholesale gas prices that led to 12 utility companies going bust would add at least £ 100 to UK energy bills.

Centrica CEO Chris O’Shea said the increase would apply to every UK home.

Food prices are also rising after Covid. The prices for fresh food rose in September for the first time in 10 months by 0.3 percent according to the BRC-NielsenIQ retail price index.

The survey by the British Retail Consortium (BRC) also found that three out of five retailers expect further price increases in the run-up to Christmas.

Helen Dickinson, executive director of the British Retail Consortium, said the tight margins meant that retailers were unable to bear all of these new costs, so prices would continue to rise. “Retailers continue to do whatever they can to ensure value for their customers and work with the government to find a long-term solution to these bottlenecks that are bearing the consequences.”

The housing market is also showing no signs of slowing down since 2007, according to a property website with the highest number of transactions this year.

By 2021 there will be around 1.5 million sales across the UK, Zoopla predicts. She added that apartment transactions are expected to drop to 1.2 million in 2022, which is the long-term average but will remain relatively high compared to the last decade. Richard Donnell of Zoopla said: “2021 will be a record year for the housing market with the most homeowner moves since 2007 and nearly £ 500 billion in home sales.

“The effects of the pandemic on the housing market must continue, but at a less hectic pace.”

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