The cost of living has gone up by 3.1 per cent in the year to November — above most observers’ expectations and the highest rate in six years. But there is another figure we need to take on board to understand the impact of the increase: wages went up by 2.2 per cent during the same period. What that means is a squeeze on incomes and spending power — the cost of food has gone up by nearly twice the rate of inflation. That will fall hard on families and the elderly especially. Yet only two years ago the Governor of the Bank of England, Mark Carney, was writing his fourth letter to the Chancellor to explain why inflation figures were below the target.
In the past year, households have suffered since sterling’s Brexit-induced devaluation. For it’s the fall in the value of the currency that is behind much of the increase in the price of food and fuel. The cost of air travel is one component of the inflation figure; so is the cost of computer games. But when you add to this the increase in the price of essentials — in this weather, we have to keep warm — it’s looking like a pretty bleak Christmas. Inflation isn’t just affecting people trying to fly out of the country and play computer games at home; the rises are also bread and butter issues — the price of bread has risen by more than five per cent; butter by more than a fifth.
The Governor will now have to write to the Chancellor to explain why inflation is now above three per cent, but they both know the effect of the fall in the value of sterling since Brexit. That isn’t going away: it may well be the case that the rate of increase in prices will taper off next year but analysts at accountants PwC suggest that wage growth is unlikely to keep pace with inflation for months to come. So, we can anticipate a continuing squeeze on incomes, with a knock-on effect on economic growth.
Any President welcome
The US ambassador to the UK, Woody Johnson, says he hopes President Trump will indeed come to London early next year, though he acknowledged that “feathers had been ruffled” in the President’s spat with the PM over his retweeting messages from a British far-Right group. The visit will probably coincide with the opening of the new US Embassy building in February and is unlikely to be a state affair, with all the pomp that entails.
Still, the mere prospect of Mr Trump visiting London has caused several politicians to call for protests and boycotts. The Mayor, Sadiq Khan, has said his visit would not be welcome. But we should be more mature than this. If President Trump can visit Paris and Brussels and be received in an amicable fashion, it would be very odd if he couldn’t come to London. Whatever we may think of the President’s stance on various issues, we should make any US President welcome. The US is our close ally and friend and we should receive its head of state, no matter who he is, with the civility that reflects that.
A win-win auction
Our Christmas appeal in aid of The Felix Project’s scheme to help hungry children has plainly struck a chord with readers. Today we launch a second auction of money-can’t-buy items as part of the fundraising effort, which means you have the chance to pick up the ideal Christmas present while helping a good cause. Among the terrific lots available are artworks by Grayson Perry and the Standard’s brilliant cartoonist Christian Adams, and the chance to spend a day with top chef Ollie Dabbous. The online auction will be open for a week — please make a bid to help our appeal.