Govt under attack as inflation rises
Opposition parties have criticised the government’s management of the economy as inflation rises further above target.
Consumer price index (CPI) inflation increased 0.1 per cent to 2.2 per cent in January, figures from the Office for National Statistics (ONS) released today show.
Rising utility bills and an increase in producer prices have been blamed for the quickened pace of inflation. Retail price index inflation rose by 4.1 per cent but overall figures were lower than analyst expectations.
Inflation is expected to rise above three per cent by the end of the year, a development which would force Bank of England governor Mervyn King to write an explanatory letter to the government.
The Conservatives and Liberal Democrats are less than enthusiastic about the current state of the economy, which is expected to undergo a dramatic slowdown in 2008.
Shadow chief secretary to the Treasury Philip Hammond said the prime minister’s credibility had been seriously damaged by recent developments.
“No one believes Gordon Brown any more when he boasts about getting inflation down. Inflation is higher today than it was in 1997,” he said.
“Thanks to his economic incompetence, hard-working families are being hit by double-digit hikes in food, fuel and housing costs.
“With real take-home pay falling, people are finding it tougher to make ends meet.”
Lib Dem economic affairs spokesperson Vince Cable said high inflation meant the Bank of England was “hamstrung” in its efforts to keep interest rates low.
“It is now very clear that we will not get the interest rate slashing that occurred in the US, leaving many people struggling to repay debts and increasing the likelihood of big falls in the housing market,” he commented.
“The Bank of England is clearly hoping that we will see a fall in inflation in the next 12 months, but while high oil and food prices and rising wages continue to push it higher there is a real danger we will end up with a stagnant economy with high inflation.”
Interest rates are currently at 5.25 per cent after the monetary policy committee (MPC) implemented a quarter-point cut last week.
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