It now seems a matter of time before inflation tumbles below 1 per cent.
The price war between supermarkets – so often mere PR campaigns rather than reality – is actually real this time. The oil price is falling amid about world demand and America’s fracking miracle. The strong pound is making imported goods ever cheaper.
On the surface, this seems to be great for the British people. But do you really get the impression that we are all feeling better off these days? That the low price of the weekly shop means we have more at the end of the week to spend on fun stuff? Hardly.
The reason is simple: even with price rises at these five year lows, with Bank governor Mark Carney facing the real prospect of having to write to the Chancellor to explain why inflation has fallen so far, wages have not kept up the pace. In fact, if you include bonuses, average earnings are still only rising at 0.6 per cent – precisely half the amount that prices are going up.
In other words, in real terms, people are getting poorer by the week.
The economy may be improving from its dismal position in 2008. The queues of the unemployed may be shortening. But what kind of jobs are people going into? Poorly paid, self-employed, often multiple jobs to make ends meet.
This will have numerous effects: it will pile yet more pressure on companies to cut their prices further - with all the implications for redundancies that implies, it will worsen the country’s financial position as the tax-take dwindles, and the lack of a feel-good factor will generally undermine the government’s claims that they have saved the economy.
Given Labour’s dismal scoresheet on the economy last time around, and the Conservative and Lib Dem positions presiding over the current situation, it seems fairly obvious that the predominantly working class poor, most badly affected by the income squeeze, are going to be looking somewhere else for solutions when it comes to the next Election.
A fact of which I suspect Mr Farage is acutely aware.Reuse content