Inflation in the UK has fallen, and now energy prices are likely to fall further. The tiresome “cost of living crisis” could soon be over. But it’s not that easy.
Rishi Sunak is confident his plan will work. The British Prime Minister had promised that he would halve inflation, boost economic growth and reduce public debt – and sees himself on the right track.
If things turn out differently, the conservative politician should certainly not have a chance to turn public mood until the parliamentary elections planned for 2024. In all polls, the Social Democratic Labor Party is well ahead of Sunak’s Tories. Probably the biggest problem for the Conservatives: The “costs of living” – the cost of living – the British have been growing over their heads for a long time.
“Light at the end of the tunnel”
But now some experts and the government see the first signs that something could change. Inflation fell significantly for the third month in a row: In July, annual inflation was 6.8 percent. Not so long ago, it was still a good 11 percent. The Bank of England expects around 5 percent at the end of the year – Sunak would have achieved this goal. The prime minister proudly announced that people would see “light at the end of the tunnel”. In addition, real wages rose again for the first time in a long time.
And today there should be further relief for British consumers: according to all expectations, the regulator Ofgem will significantly lower the price cap for electricity and gas. The energy consultancy Cornwall Insight expects the maximum price per kilowatt hour to fall by around 7 percent. An average household should therefore pay around 1,925 pounds (almost 2,250 euros) for energy from October to December – calculated on an annual basis – that would be the lowest level since March 2022.
Experts remain skeptical
“The cost of living crisis seems to be coming to an end,” commented economist Ashley Webb of economic research firm Capital Economics. The market research company GfK recorded a significant increase in consumer sentiment by five points in July.
But most experts remain sceptical. Inflation has actually improved, the broadcaster Sky News admitted. But government policy played only a minor role – the reason is rather the fall in raw material prices on the world market. Voters see it that way too: In a Yougov poll for the Times newspaper, only 8 percent praised Sunak for the development.
The economy is stagnant
Other economic data also speak against an early end to the crisis. Unemployment is rising, while the number of vacancies is falling. Contrary to Sunak’s promises, the economy is stagnating and debts have increased since he took office.
An example of how difficult the situation is: The consumer protection organization “Which?” estimated that the heating was not turned on in 13 million households last winter in order to save money. recently. Above all, low-income and people between 45 and 64 were affected. The think tank Resolution Foundation doubts that this will change in the coming winter.
Food permanently expensive
Although energy costs are falling, every third household in England has to pay more than in the previous year – because the daily basic fee is increasing and the monthly government subsidy of 67 pounds has expired. Other government aid has increased. But the cost of essential goods has skyrocketed even more.
Hugh Pill, chief economist at the Bank of England, has warned that groceries will remain expensive. Therefore, according to the Resolution Foundation, Ofgem’s decision to cut energy prices is unlikely to “prevent another winter of financial hardship”.
Fear of real estate bubble
High mortgage rates are also a concern. Because the central bank has raised interest rates 14 times in a row, most recently to 5.25 percent, homeowners have to pay significantly for the UK’s variable rates. House prices are falling – fears of a real estate bubble are growing.
“There is no immediate end in sight,” commented Sky News. The opposition sees itself on top. People feel “trapped” and “suffocated,” Labor leader Keir Starmer said recently. This is one of the reasons why Prime Minister Sunak has not yet managed to catch up with his challenger.
Source: Stern
