“Winter Of Discontent” Looms As Inflation Hits 10-Year High And Sends Cost Of Living Soaring
A record high for fuel prices have led to a 10-year high in inflation (Alamy)
Inflation has leapt to a 10-year high as supply chain issues and fuel prices have sent the cost of living soaring in recent months.
The Office for National Statistics (ONS) said the Consumer Prices Index rose from 4.2% in October to 5.1% in November, which coupled with the rise of the Omicron coronavirus variant led one financial analyst to declare: “Welcome to the winter of discontent.”
The Bank of England is now being urged to take action and raise interest rates to help take runaway inflation, as the ONS reported surging prices for clothing and food as well as energy and cars.
Its Monetary Policy Committee meets tomorrow to discuss the matter, though analysts warn that increasing the base rate may also dampen growth just at the point the economy faces a fresh battering if the surge of Omicron cause activity to reduce.
It is the first time CPI has broken the 5% barrier since 2011, and is two and half times the Bank’s target of 2%. The increase surpassed predictions inflation would rise to 4.8%.
Yesterday the International Monetary Fund predicted UK inflation would reach around 5.5% early next year, the highest rate in 30 years, and urged the Bank not to succumb to "inaction bias".
The Joseph Rowntree Foundation has that warned its own analysis, based on OBR forecasts suggesting inflation would be 4.4% by next April, shows 100,000 people are at risk of falling into deep poverty. Given today’s figures “this could be an underestimate”.
“Everyone in our country should be able to afford the basics yet there is no sign of any respite on the horizon for families struggling to keep their heads above water," Katie Schmuecker, Deputy Director of Policy and Partnerships at the Joseph Rowntree Foundation said.
“Too many people who are being hit by rising energy bills and increasing food prices are forced to ask themselves what essentials they will go without this winter.”
The CPI rise was driven in part by petrol hitting 145.8p a litre last month, its highest price ever recorded, and an ongoing chip shortage for new cars triggering a rise in second-hand values.
Chancellor Rishi Sunak has pledged to spend £4.2billion to alleviate the challenge inflation will post for many households. He encouraged people to take up the offer of vaccination in order to limit the spread of Covid, and any associated economic impact of lockdown.
“With a resurgence of the virus, the most important thing we can do to safeguard the economic recovery is for everyone to get boosted now,” Sunak said.
Labour’s shadow Chancellor Rachel Reeves said were a "stark illustration" of the cost of living crisis, and accused the government of not doing enough to tackle inflation.
“Instead of taking action, the Conservatives look the other way," Reeves said. "They blame global problems while they trap us in a high tax, low growth cycle.”
The Tory former Cabinet minister Liam Fox urged the Bank to do more to tackle the issue.
“Transient inflation continues to surge but still no Bank of England response,” he tweeted.
“The later the action, the more painful it will be.”
Dr Jackie Mulligan, founder of Shoplocalonline.org and member government's High Streets Task Force, believed the record level of inflation could be devastating for consumers and businesses.
“Runaway inflation coupled with decreasing footfall due to the current Covid situation is seriously restricting the recovery of our local high streets at what should be peak festive trading,” Mulligan said.
She urged the Treasury to “urgently step in and offer financial support” or business would face serious long term consequences.
"Welcome to the winter of discontent,” said Lewis Shaw, founder of Shaw Financial Services.
“Alongside raging inflation and its impact on households, there is a looming threat of another lockdown to contain the Omicron variant and we now have a scandal in Number 10, just when we needed strong leadership most.
"Sadly, things look as though they’re set to get worse.”
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