Lib Dems: Inflation rise hits the poorest

Senior Liberal Democrats have been commenting on the inflation rise today. I have to say that although  0.5% in a month is a lot, it feels like so much more. The prices of so much of my supermarket shop seems to have gone up by a lot more.

In Scorland, our Economy spokesperson Carolyn Caddick said:

Rising inflation shows that the British public are paying the price for Theresa May’s decision to take Britain out of the Single Market. With the pound falling in value by 18% since the referendum, the price of imports have shot up and broken the official target. Every Scot going on holiday abroad is seeing that their pounds do not buy what they used to.

Worst of all, the dramatic leap in food prices is hitting the poorest the most.

The fragile UK economy has been kept on life support by consumer spending, but with prices rising, that is now threatened. If Theresa May should change course immediately, and recognise that you can’t have a hard Brexit and affordable prices.

Our Shadow Chancellor Susan Kramer also blamed Brexit, saying that “You can’t have a hard brexit and affordable prices.”

This is proof that the British public are paying the price for Theresa May’s decision to take Britain out of the Single Market, which is causing a Brexit squeeze. With the pound falling in value by 18% since the referendum, the price of imports have shot up and broken the official target.

Worst of all, the dramatic leap in food prices is hitting the poorest the most, with some producers also reducing package sizes, meaning the real inflation figure is now much higher.

The fragile UK economy has been kept on life support by consumer spending, but with prices rising, that is now threatened.

You can’t have a hard Brexit and affordable prices.

* Caron Lindsay is Editor of Liberal Democrat Voice and blogs at Caron's Musings

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23 Comments

  • Well of course it feels like more, because it is more. When inflation rises in Britain the prices are whacked up way beyond that inflation rate. We’ve always done this in the UK and especially for utilities.

  • To be fair, manufacturers having been getting greedy and consistently shrinking package sizes for the last 5 years at least, way before Brexit.

    I do not agree that you cannot have “hard brexit” and affordable prices, when we leave the EU and are able to strike Free trade agreements with the rest of the world, the costs of foods from “outside the EU” will come down, reducing costs in the supermarkets, putting real money back in the pockets of the consumer which in turn gets spent on other goods and services and local economies.

    Yes 2.3% inflation is higher than the Governments target, but some inflation is needed in order for the economy to grow. If inflation was staying around the 0.5 mark people would be carrying on about the economy stagnating and blaming lack of growth on Brexit as well

  • Matt – the rest of the world already have existing agreements – some of which will be exclusive. The whole world isnt going to completely tear up its existing trade agreements just because the UK is leaving the EU. Even if this was a barrier, if we had free trade agreements with every country outside of the EU it would destroy UK manufacturing

  • @Alistair
    “the rest of the world already have existing agreements – some of which will be exclusive”

    I don’t see what your getting at?

    The UK has trade agreements with “some” countries through it’s membership of the EU.
    Once we leave the EU we will be unshackled and able to forge our own trade agreements which will reflect our own interests better. United states, Canada, China, Brazil, India, Argentina Australia, Newzealand, just to name a few have all said they are eager for free trade agreements with the UK.
    There is a whole world of opportunities out there waiting for us. The Eu share of global GDP is shrinking drastically, it’s ever closer union and protectionist policies are not in the interests of the UK.
    Our best interests are served outside of the EU

  • Matt,
    Haven’t you noticed Mr Trumps policy is America first. Protectionism is back and your trying to sail off to a free trade utopia that doesn’t exist, doomed too be badly disappointed.

  • @frankie
    “your trying to sail off to a free trade utopia that doesn’t exist, doomed too be badly disappointed.”
    With all due respect frankie, you do not not know that, you are surmising.

    Do you accept that the EU is in an ever drastic decline in the worlds GDP?
    Do you also accept that the EU solution to this crisis is to close ranks, with aims for an ever closer union and protectionist policies and trade amongst EU member states and imposing higher tariffs on goods from Non EU countries?
    Do you also acknowledge that the few trade deals that the EU has completed tend to exclude services (with which 80% of the uk economy is dependant) and vast area’s of agriculture?

    None of this is good for the UK’s prosperity in an ever changing global economy. We need out of the Eu

  • Andrew Melmoth 21st Mar '17 - 11:51pm

    -matt
    You’re not living in the real world. Look at the history of Chinese trade deals. They have absolutely no interest in opening up their service sectors to foreign competition. The EU on the other hand is not only the richest market in the world but also has the most liberal trade in services of any free trade bloc. It’s precisely because we are a service based economy that this Brexit adventure is going to prove so ruinous.

  • Well, a trade deal with China would be destructive for the UK. They will force the UK to open up its market for cheap China goods of volatile quality while they themselves delay, while also seeking to hoard UK national assets. The Swiss-China trade deal is a typical one.

  • Next, a trade deal with a protectionist India would be similar to one with China. India will also demand the UK to open up borders for Indian immigrants, contrary to the promise of reducing immigration.

  • @matt – “Do you accept that the EU is in an ever drastic decline in the worlds GDP?”

    That is inevitable, as is the UK’s declining share of the world’s GDP, regardless of Brexit, due mainly to the rise of the BRIC economies and the centres of population growth and grow in living standards is outside of the EU, USA etc.. So not really a crisis, just reality.

    If you look at UK exports, whilst the percentage of exports that go to the EU has declined the monetary value hasn’t. Ie. the UK has grown it’s non-EU exports whilst being a member of the EU. So likewise no crisis here.

    Actually having a protected ‘home’ market can be good for the economy! You only need to look at the USA to see the sense of this, it is a big contributing factor as to why US companies have been able to grow large before having to engage with the rest of the world.

    Do you also acknowledge that the few trade deals that the EU has completed tend to exclude services … and vast area’s of agriculture?
    Makes sense given these sectors provide employment to large numbers of residents…

  • Arnold Kiel 22nd Mar '17 - 7:52am

    The EU CAP protects local production, food safety, free intra-European trade, and the cultural aspects of having a diverse European agricultural sector, also on behalf of the UK.

    The United states, Canada, China, Brazil, India, Argentina Australia, Newzealand have highly subsidized agricultural sectors. Dropping all tariffs in post-Brexit Britain will not only destroy the UK’s agricultural ecosystem, but also exclude it from the European market. If the UK then, as indicated by the PM retaliates against continental products, British consumers will have less choice, less safety, and higher prices.

    The concentration of economic activity in big cities will accelerate further, and you will eat many more things that have spent weeks or months in transit. Enjoy!

    If one believes that Europe’s shrinking share of global GDP is a problem, then he/she says that the rest of the world should cut its birthrates and remain as poor as they are today. What a great open, global outlook! Reminds me of Ms. May’s “open Britain” (England, rather).

    And let’s not forget the income-side of the British consumer’s shrinking purchasing power: those in work will feel the effect of terminal deindustrialization as British manufacturing has a lot more to loose in this high-cost- than to gain in distant low-cost continents. All others will feel many more years of austerity.

  • @Thomas

    “China would be destructive for the UK. They will force the UK to open up its market for cheap China goods of volatile quality”
    First of all lets get one thing straight, nobody would “force” the uk to do anything, that’s why they are called “negotiations” and “agreements” we will not agree to anything that is not in our interests.
    “India will also demand the UK to open up borders for Indian immigrants” The same as above, India, can talk tough and demand all that it want’s to during the negotiations and I fully expect them to, but what you demand and what you get in a compromised deal are 2 differently entirely things altogether. The Uk will never agree a Trade agreement with India that incl Free movement of people, simple, that does not mean that NO trade agreements are available full stop.

    @Roland
    “That is inevitable, as is the UK’s declining share of the world’s GDP”
    It is something that we have absolutely no control over and can not adjust our policies to react to this situation whilst we are shackled to the EU that is for sure, hence the reason we not out

  • Last sentence above should have read hence the reason we must get out of the EU

    @Arnold Kiel
    Because the CAP the EU forces us to have ridiculously high tariffs on some imports from outside the EU, especially products congaing sugar, sugar cane, Corn Syrup etc in order to protect the EU sugar Beet

    “Dropping all tariffs in post-Brexit Britain will not only destroy the UK’s agricultural ecosystem, but also exclude it from the European market” Explain please, why would us buying something from Canada for example destroy our ecosystem and also exclude us from selling Wheat for example to France. Definitive answer please not just speculation
    “you will eat many more things that have spent weeks or months in transit. ”
    I think you will find that some of our products spend far longer being trawled across European Roads and countries than what they do being flown from country to country,
    so I do not think that argument stakes up somehow.

    “If one believes that Europe’s shrinking share of global GDP is a problem, then he/she says that the rest of the world should cut its birthrates and remain as poor as they are today. What a great open, global outlook” I dont think anyone is arguing for the world to reduce their birth rates are they? but then doing a Merkyl is also not the answer and calling for unlimited immigration because of Germany’s ever decreasing population rate of indigenous people and an older population, calling on cheap migrant labour to depress wages. That maybe good for Germany, but that is not good for the UK or the rest of Europe for that matter

  • @Matt – In circa 1970 the UK population was circa 56m and the world population was approaching 3Bn, in 2015 the UK population was circa 65m and the world population was estimated to be circa 7Bn. Also over this time the extent of lands and resources over which the UK can exercise exclusive control has remained largely constant; although in the 70’s North sea oil and gas production was on the rise and now is on the decline.

    Given most of the new economic growth is outside of the UK, as billions of people move up the economic prosperity ladder, basic maths tells me that the EU has sweet F.A. to do with the UKs declining share of the worlds GDP…

  • @ matt
    Yes, the CAP protects European farmers. If you drop that protection, equivalent local products become uncompetitive, i.e. their farming will stop (unless the UK government pays even higher subsidies than the EU today).

    Participation in the European single market for agricultural products is based on farming subsidies in line with EU-regulation and compliance with the customs union rules with respect to products of non-EU origin. This also applies to inputs like seeds, feedstock, fertilizers etc. Every kilo of UK agricultural products sold to the EU would require documented proof of the above, i.e. requiring end-to-end separation of EU-destined from other batches. Even that could be challenged on competition grounds.

    I shall not engage with your unusual view that trucking within Europe exceeds intercontinental transport times or can be replaced by airfreight.

    I fail to connect your issue that “The Eu share of global GDP is shrinking drastically” (which, in my view is not an issue but simple arithmetic) with the unrelated and false claim “but then doing a Merkyl is also not the answer and calling for unlimited immigration because of Germany’s ever decreasing population rate of indigenous people and an older population, calling on cheap migrant labour to depress wages. That maybe good for Germany, but that is not good for the UK or the rest of Europe for that matter”

    Just for the record: Ms. Merkel refrained from closing the German border to Austria to refugees(!) already in Europe and she never called for unlimited immigration. Your connecting this event to “calling on cheap migrant labor” is impossible to respond to in a manner you would not find insulting (I therefore won’t). These people are mostly unemployed, will not depress any wages, cost Germany a lot of money (and Ms. Merkel possibly her job).

    That is not good for Germany, but was a moral imperative. You can call it bad for the UK or the rest of Europe if you do not see the moral dimension of the refugee-problem, which does not surprise me.

  • Matt,

    Time will tell who is right. One of us is about to enter the school of hard knocks, I rather suspect it isn’t me.

  • @Arnold Kiel

    If your not going to engage with the questions asked of you then there is little point discussing it with you further, you went to a lot of effort to respond with a non response.

    With regards to Germany / Suppressed wages / Migrant workers, the facts speak for themselves and the evidence is out there for all to read. How you can contest that Germany did not thrive by suppressing and driving down wages through migrant labour astounds me.

    I am all up for robust constructive debate, but there is little point in doing so with people who refuse to take of the rose tinted glasses and instead rely on distortion.

    Frankie
    Ditto, you have your views, I have mine
    I believe in a UK which is outward looking and is able to adapt in changing global circumstances
    You believe in an EU whose only aspiration for change is to inject more of the same ingredients that it is making it ill in the first place.

    I know which I prefer

  • Matt,

    The world doesn’t owe the UK a living or even thinks very much about us. There isn’t a queue of countries beating down our door to do fantastic trade deals. I’m afraid just believing in something doesn’t make it true and as for rose tinted glasses they are de rigour for Brave Brexiteers.

  • Malcolm Todd 22nd Mar '17 - 1:50pm

    The world according to matt:

    “when we leave the EU and are able to strike Free trade agreements with the rest of the world, the costs of foods from ‘outside the EU’ will come down, … putting real money back in the pockets of the consumer which in turn gets spent on other goods and services and local economies.”

    “Once we leave the EU we will be unshackled and able to forge our own trade agreements which will reflect our own interests better.”

    “There is a whole world of opportunities out there waiting for us.”

    “Nobody would ‘force’ the uk to do anything, that’s why they are called ‘negotiations’ and ‘agreements’ we will not agree to anything that is not in our interests.”

    “I am all up for robust constructive debate, but there is little point in doing so with people who refuse to take of the rose tinted glasses and instead rely on distortion.”

    Indeed; there seems little point debating with someone who sees only rose-coloured uplands and calm, friendly seas the far side of 2019.

  • Arnold Kiel 22nd Mar '17 - 3:14pm

    @ matt
    Nobody in Germany makes a connection between wage levels and immigration. It is a leave-myth. Kindly provide the facts/evidence you refer to.

    In a competitive world, low-skills have a low value. Those wages are not suppressed, but (barely) competitive. The alternatives are unemployment or more benefits, already the biggest item and deficit-driver on any advanced economy’s budget.

  • @Malcolm

    “Indeed; there seems little point debating with someone who sees only rose-coloured uplands and calm, friendly seas the far side of 2019.”

    I have not once said everything would be easy, calm sea’s ahead, I have never once said that the UK would get everything it wants. I have used terms like “negotiations” “compromises” I am not looking at the UK or the world for that matter with rose tinted glasses
    I think it is people on your side of the argument who keeps using language like “Demands” “Force” “Destroy” using fear to say that the EU is such a wonderful organisation and how the UK needs this safety blanket because it lacks the ability to stand on it’s own 2 feet in a globalised world.
    You have had years to set out a Vision for the EU, how you would like to see it reformed and you did nothing, it was just carry on business as usual, more of the same please. Now your world has been rocked as the unthinkable has happened and the people have voted to leave and yet still you have no answers or vision, you rely on pacifying people through fear instead.
    That ship has sailed people.
    @Arnold Kiel
    You speak for all of Germany do you?
    There are plenty of articles written by UK and German Economists that say otherwise.
    “low-skills have a low value. Those wages are not suppressed” Funny, in my world keeping wages low is suppressing wages in every sense of the word.
    But then, I would not expect someone who comes from CFO positions to argue any differently really

  • We’ve spent most of the last ten years declining pensions, sky rocketing property prices, devalue the currency through QE and with savings being reduced to rubble.
    Teenagers are now basically borrowing ten thousands of pounds to stay in education to mask the reality that job creation is pretty much in the zero hour contract/agency sector and we’re supposed to call this a success. The only reason it isn’t even worse is because that we didn’t adopt the Euro. The EU’s record since it was formed in 1993 has been dismal.
    When inflation was low, we’re told that it needed to go up because deflation was a bigger risk than inflation. Now it’s up to about the level it was 4 years ago when, by the way we were still in the EU, we’re told it is a terrible bad thing. It was higher than this for all of the 1970s when we joined the EEC, most of the 80s when we were still in it and well into the 1990s after it became the EU . In fact it only really dropped significantly because of an extended recession. Inflation moves up and down all the time. Currencies fluctuate all the time.

  • Peter Martin 25th Mar '17 - 5:48pm

    “Lib Dems: Inflation rise hits the poorest”

    That depends. Historically, there is no clear link between increased inequality and an increased level of inflation. If there is a link it could be in the inverse. We’ve tended to be a more equal society when inflation rates have been a good deal higher than they are now.

    In saying this I’m not necessarily arguing for a return to the levels of inflation we saw in the 70’s but, on the other hand, we should not just swallow the Tory line that a very low rate of inflation is the be-all and end-all of economic policy.

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