As expected the Bank of England has raised interest rates again this time by 0.25 percentage points to 5.25 per cent hoping that slowing the pace of increases whilst persistently high inflation will begin to ease.
It’s reported that interest rates fell more than was expected in June whilst economists were expecting a quarter-point increase after central bank raised interest rates by half a point when they last met.
However despite inflation rates falling the cost of items and goods in the UK are continuing to rise faster compared to other economies like the Eurozone, Japan and the US.
Despite prime minister Sunak’s assurances that although he had previously promised that he would half inflation by the end of 2023 which obviously won’t be happening now. He also claims that ‘Britons can see the light at the end of the tunnel’ on LBC radio earlier this week. Predictably this bold claim doesn’t match real life experiences of the public who are experiencing ever increasing daily costs plunging many even further into poverty.
How do you know when a Tory (Conservative) politician is lying? They open their mouth.
The latest official data shows that consumer prices have risen 7.9 per cent in the year to June, down from 10.1 per cent at the start of the year.
When interviewed recently by the BBC Michael Saunders, a former Monetary Policy Committee member that now advises the consultancy organisation Oxford Economics, said the impact of higher interest rates on households had been “slower and smaller” than in the past because fixed-rate mortgages were more common, homeowners had larger savings and fewer had a property loan.
He added the economy would still face a “powerful delayed monetary tightening” as fixed-rate mortgages expired.
As the reality of fixed rate mortgages coming to an end only just starting to hit home owners, many of which are struggling to meet their mortgage payments, many will be forced to sell their properties and I predict thousands will in the near future become homeless.
Already the demand for homeless services far outstretches the amount of temporary accommodation that local councils and authorities can’t be met leaving them having to prioritise vulnerable people, many of which are offered unsuitable accommodation.
Of course Sunk has no idea how the decisions he makes impact the public and also their repercussions. Living a life of great privilege and luxury set apart from ‘normal’ people with not a care in the world.
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The Bank of England has announced its largest interest rate rise in almost 30 years. The UK now faces soaring inflation rates and cost of living expenses.
The Bank of England has warned that this will result in the UK economy being plunged into a recession for more than a year this autumn as the rising energy prices push inflation above 13%.
The Bank also forecasts that the combined five quarters of economic contraction, a 5% fall in real-terms living standards, and increased interest rates by 0.5 percentage points will result in the largest single inflation rate rise in 28 years.
The Bank’s baseline forecast is also forecasting the GDP (Gross Domestic Product) to fall by 1.25% in 2023 and 0.25% in 2024. This will show the first example of two years of annual economic contraction since the 1960s.
The Bank’s Monetary Policy committee voted 8-1 to increase the base rate to 1.75% as an attempt to prevent the inflationary impact of soaring energy prices being compounded by domestic price and wage pressures.
The interest rate increase will add around £650 to annual mortgage repayments for those with an average tracker mortgage. Monthly tracker repayments for homeowners have been increasing since interest rates began rising from 0.1% last December (2021) at around £170.
This relentlessly cruel inflation rate which now is going to be the highest since September 1980, is being driven by the ever increasing cost of wholesale gas on the international markets. This has doubled since May and is now on course to treble domestic energy bills.
This is a cost that the poorest and most vulnerable will not be able to meet.
The Bank also believes that the domestic energy price cap is expected to reach £3,500 per household in October. This will push the inflation rate to peak at 13.3% in the fourth quarter of this year and is also expected to remain above 10% until the middle of next year.
However the Inflation rates are also forecasted to fall back slightly to 9.5% in the third quarter and 5.5% by the end of the 2023.
The domestic energy price cap is sadly expected to increase again when the energy regulator Ofgem will review the costs in January. The MPC (Marginal Propensity to Consume) believes that the inflationary impact will be offset by falls in other areas. It has also said that the goods price inflation costs may have peaked but commodity prices are already beginning to fall back.
Real living standards are forecasted to fall by 1.5% this year and 2.25% next year, with a 5% decline. This includes the direct government support payments of at least £400 per-bill payer. These payments don’t even scratch the surface of the real life devastating impact of increasing energy costs that less well off people are already facing.
A five-quarter recession which will end in the first quarter of 2024 would be very similar in length to the financial downturns of 2007-08 and also the early 1990s and early 1980s. However this won’t be as deep as the previous financial crisis with a predicted decline in GDP of 2.1%.
The Bank’s Monetary Policy Committee have also stated that the ever increasing energy prices are responsible for the majority of the rise in inflation, but also keep in mind the continued COVID supply chain disruption is still playing a significant factor in rising costs.
The MPC is also forecasting that wages will rise by 6% this year but has also warned that as the recession starts to take hold unemployment will probably begin to rise next year from the current 3.8% sending it to peak at 5.5%.
The explanation given by the MPC is as follows: “The United Kingdom is now projected to enter a recession from the fourth quarter of this year. Real household post-tax income is projected to fall sharply in 2022 and 2023 while consumption turns negative.”
“The labour market remains tight, and domestic cost and price pressures are elevated. There is a risk that a longer period of externally generated price inflation will lead to more enduring domestic price and wage pressures.
“In view of these considerations, the Committee voted to increase the Bank Rate by 0.5 percentage points, to 1.75%.”
Personal finance expert Gemma Godfrey is quoted as saying on Sky News
“The Bank of England had a “tough challenge” when it came to trying to control inflation and it was a “war on all fronts”.
She said: “The Bank of England has a really tough challenge where they’re trying to control inflation, but they don’t want to tip us into recession.
“So what we’ve been hearing for the past few months is that our economy has been slowing down. We’re not spending as much. Companies aren’t selling as much. And that obviously risks jobs.
“But obviously, everybody is aware that our everyday living costs are rising. They’re set to rise by more than five times as much as the target the Bank of England sets.
“And it’s a war on all fronts, it’s food, it’s energy, people are really struggling. So the Bank of England will try and increase rates to try and slow this down.
“But there’s calls that they’ve been too slow or they’re being too aggressive. It’s a very tough balancing act for the many millions of families around the UK.”
Responding to the Bank of England’s announcement today, Labours shadow chancellor Ms Reeves said Tory leadership candidates were “touring the country” and announcing unworkable policies that would not help people get through the cost of living crisis.
She said: “This is further proof that the Conservatives have lost control of the economy, with skyrocketing inflation set to continue, while mortgage and borrowing rates continue to rise.
“Labour would help households right now by removing the tax breaks that are subsidising oil and gas producers and using that money to help people now, including by cutting VAT on energy bills.”
Meanwhile The Labour Party have failed to commit to lowering energy costs.
Conservative former chancellor Ken Clarke has warned of a “very unpleasant” winter for many households in the country.
Lord Clarke of Nottingham told the BBC: “Nothing is certain, but I’ve thought for some time we faced the risk of an extremely serious recession.”
“This winter is certainly going to be very unpleasant for many households in the country and I think it’s absolutely inevitable the Bank of England acted as it did.”
“I’d have been rather alarmed if they hadn’t put it up by at least 0.5%. I think the Monetary Policy Committee probably considered 0.75%… but decided in the present circumstances that that was too fast.
“They’ve taken the right decision and they’re going to have to do it again as the year goes on.”
Meanwhile this leaves the average person facing spiralling cost of living expenses and dramatically increasing energy costs whilst receiving little or no adequate financial help or support.
Without adequate financial help the UK will undoubtably face thousands of vulnerable people suffering or worse as the poorest always pay the highest cost for these increasing prices.
Action needs to be taken now to prevent these possible deaths by tackling OFGEM and their refusal to challenge the energy companies.
There isn’t a person with compassion that can think that it’s ok for energy companies to profit in such a manner whilst people face a long, bleak winter with no sight of help or relief.
However with the Conservative Party and probable future prime minister Liz Truss at the helm of the country, they will undoubtably find a way to profit from this situation whilst ignoring the scale of the energy and cost of living crisis that the UK is facing.
The UK inflation rate has risen to 9.4% in a year to June 2022. This has therefore resulted in food, petrol and energy costs rise at their fastest rate for 40 years.
This has had a very detrimental affect upon the poorest households who are according to the Resolution Foundation being hit the most by these seemingly never-ending rising costs.
Not only have these price increases hit the poorest, the higher earners that had previously managed to pay their bills, they also find themselves struggling which is undoubtably causing them distress and worry.
At the same time official figures also show that the regular rate of pay is falling at the fastest rate since 2001 when price increases and energy cost increases are taken into account.
The Labour party have announced that they are pushing for urgent action from the government, calling for it to take VAT off energy bills and have accused the government of a decade of economic “mismanagement” and has called for urgent action.
This is far from a good response from the Labour Party. It’s not good enough to just request that the VAT off the cost of energy. Instead they should be demanding that there is a decrees in not only the VAT level but the cost to the consumer for the energy that they use.
It’s unacceptable that the public are to be expected to make these costs and manage to feed themselves and their families, pay the rent or mortgage and bills.
It’s also important to remember that the increasing costs of petrol and diesel is having a massive detrimental affect upon the disabled, poorest and low wage earners, many of which rely upon a car to manage everyday tasks and the ability to get to work.
Already on social media, disabled users are reporting that they are having to make a choice of charging their electric powered wheelchairs and scooters or putting the money towards the cost of feeding themselves and their families.
It’s certainly not good enough that local councils, most of which have already seen a massive cut to their funding are now being asked to provide warm places for the public to sit in during the winter months.
What is really needed is for local authorities, organisations and the public to directly challenge the government in whatever way they can. We must not sit back and allow this to happen.
Many plan to hold a no payment protest which will hit the energy companies hard and it needs too. Non payment is one of the reasons why the Poll Tax was abolished, along with the protests. Back then we saw local communities collectively taking action, standing together in agreement saying enough is enough.
We desperately need to see similar actions like this, more marches and protests, the public, local authorities and organisations saying enough is enough we can’t allow this to continue.
A general election is needed now as a matter of urgency, because if pundits are right and Truss becomes prime minister it could well become a whole lot worse than it is now.
According to a recent report from Child Poverty Action Group CPAG) claimants are being forced to repay their full Universal Credit (UC) award despite being entitled to it.
Why Are The DWP doing this?
During the pandemic the DWP temporarily changed some of the evidence rules to complete UC claims.
As detailed in the report by CPAG in January 2021 the DWP started to look into the claims that were made during the pandemic.
Whilst doing this the DWP have been changing the entitlement decisions given to claimants declaring that many claims have been wrongfully awarded.
Why This Shouldn’t Be Happening
CPAG have expressed their concerns that the process of retrospectively deciding claimants were not entitled to UC and beginning recovery is unlawful.
In addition, the DWP is asking for evidence of entitlement via the online journal, even from claimants that are no longer getting UC and would have no reason to check their journal.
Some claimants only find out about the alleged overpayment when they receive a letter from DWP Debt Management.
They therefore miss the one month deadline for challenging a decision and often don’t know that they could make a late challenge if they have good cause.
Shockingly, this process is set to be ramped up dramatically.
The DWPs Reaction
The DWP are employing a team of 2,000 staff to look again at 2 million claims over the next five years including, but not limited to, claims made during the pandemic.
The thought that a government department that tramples on claimants’ rights in this way is to be given powers of search, seizure and arrest, as revealed in our last newsletter, is truly frightening.
Conclusion.
It’s very concerning that the government gives the DWP the authority to stamp on a person’s legal rights in this manner.
Not only are they able to stop a claimants payments without any notice they are also set to be given powers of search, seizure and arrest, as detailed in an earlier blog post.
DWP decisions such as these are life changing and literally leave people without the ability to eat, pay their rent and to keep warm.
Combined with this is the mental toll that this puts upon claimants leaving them in a state of distress not knowing where to get help.
Claimants deserve to be treated with respect and should be given the right to reply before any permanent decisions are made by the DWP.
Not only is it morally wrong to change decisions retrospectively, moving the goalposts when it suits the DWP is despicable and should be challenged at all times.
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Food prices are predicted to increase by 15% in the UK this summer. This is the highest level in more than 20 years. This is predicted to rise alongside inflation which could last until the middle of next year, according to a report by The Institute of Grocery Distribution (IGD)
This is a result of the ever increasing prices of meat, cereal, dairy, fruit and vegetable products caused by the rise in costs of wheat prices as a result of the war in Ukraine.
The Ukraine is a big supplier of wheat to the UK, combined with sanctions imposed upon Russia will undoubtably cause a hike in prices and also a probable wheat shortage. Also predicted by the grocery trade body IGD.com is a rise in costs of food items caused by production lockdowns in China and export bans on food products such as palm oil from Indonesia and wheat from India.
What does this mean?
Food costs are going to rise dramatically again making it extremely difficult for low income households to be able to afford to buy much needed food essentials. According to a survey undertaken by the Office for National Statistics (ONS) there has been an increase in the number of people spending less on food and household essentials which has risen from 36% to 41%.
This figure is set to rise again in the Autumn when as predicted by The Bank of England inflation is predicted to reach to 11%, which is the highest since the 1970s.
Rising energy costs
Households are still struggling to cope with the rise in energy costs with government payments set to be sent out to household in July. This scheme is not without its faults though leaving some low income households and disabled people exempt from this scheme.
After the second payments given by the government in October there are so far no plans to extend this to the winter and beyond, leaving many forced to live in cold homes unable to cook food.
A recent survey also carried out by the Office for National Statistics (ONS) has revealed that 52% of low income households are being forced to use less gas and electricity because they can no longer afford the cost. This in turn will also affect a households ability to cook meals.
Why does this matter?
Low income households are already burdened with an ever increasing cost of living that they can no longer afford to keep up with. Already overwhelmed with these costs and the lack of affordable food this will undoubtably cause mental distress and illness as a result of not being able to provide the basics for themselves and their families.
The lack of financial support from the government in helping the public with these costs is sadly lacking. In work and out of work benefits such as universal credit, working tax credits, ESA and PIP have failed to rise with inflation leaving households with a huge financial deficit.
The poorest can no longer be expected to bear the brunt of these ever increasing costs. Permanent financial help from the government needs to be offered before winter, if not thousands will undoubtedly become ill or worse as a result of living in cold homes unable to provide food for themselves and their families.
Please read, share and tweet this article it helps massively to raise awareness about the real issues facing working class people in the UK.
I don’t receive any payment for any of the work that I do, and like yourselves I’m struggling to be able to cope with the increasing costs of everything.
If you can afford to and would like to donate to keep my blog and campaign going theres a donate button at the top and side of this blog post. Every penny makes a massive difference and it really helps.
A huge thank you to everyone that’s helped to support my blog and campaign I really couldn’t do this without you. Thank you.
The poor side of life 