Byline: ANTHONY HILTON
ONE OF Gordon Brown's proudest boasts as Chancellor was that under hisstewardship Britain had the lowest interest rates for 50 years, the lowestinflation for 30 years and the highest number of people employed since recordsbegan. But the issue for his successor, Alistair Darling, is rather morefundamental. On a day when inflation has hit 3.3 per cent, the worst sinceLabour came to power in 1997, and so much else seems to be unwinding, are thosegood times gone for everand with them Labour's reputation for economic competence? There is no doubtthat inflation is back with a vengeance. Indeed the retail price index, whichis the old measure still used by many as the more accurate guide to what itcosts to live in the UK, is even higher, standing currently at 4.3 per cent.Nor is there any doubt that people are feeling the squeeze because wages arenot rising anywhere near as fast as prices. The pay specialists IndustrialRelations Services reported this morning that pay awards across the economy arerunning at 3.2 per cent.
Though that seems quite close to the going inflation rate, it is a falsecomfort.
Pay increases attract income tax and national insurance, so the actual moneypeople have to take home to spend is at least a fifth lower.
At the same time, other calculations show that the proportion of that takehomepay which is eaten up by essentialsmortgage payments, fuel bills and the likehas increased significantly, so for most people there is notably less to spendon the good things in life. Thatand the miserable summer so far is why so many feel so grumpy.
But fun though it may be to blame the Government for everything, in this caseit is not really its fault. It is a powerless to influence the economic weatheras it is the real weather, because the influences which are driving our priceshigher are almost all coming from overseas. In the 12 months to May, worldagricultural prices increased by 60 per cent, which alone have delivered aneight per cent rise in UK food prices. At the same, time oil prices rose morethan 80 per cent, which has put 20 per cent on the price of fuel at the pumps;a 160 per cent increase in wholesale gas prices has added 10 per cent to theaverage household electricity and gas bill.
When domestic prices have gone upfor example for things like transportit is because they, too, have been hit by these higher imported costs. And ontop of all that the pound has dropped by almost 20 per cent against the euro inthe same period, which makes most things coming from Europe more expensive.
Going on holiday there this summer will be a nasty shock to the wallet.
However, we should be grateful for small mercies and say a silent thanks forsterling's continued strength against the dollar. Without that the increase inthe price of oil and many other things would have been even more painful.
And it means it is still cheap to go to Florida's Disneyworldthough you may feel you get enough Mickey Mouse behaviour at home..
Inflation has also hit overseas. We may think our inflation is badand it isbut it is better than in most other countries. In May, inflation in the euroarea rose to 3.7 per cent, in the United States 4. …