At long last it seems as if the inflationary wave might be receding. Back-to-back drops over the past two months suggest the worst might be over.
Unsurprisingly Rishi’s PR team wasted little time in spinning this as a major political success. But while they may think this is a turning point in the polls, many know full well there were other factors at play.
This is true for two reasons. First, much of the inflation is driven by global surges in energy and food prices. The world waxes and wanes. Take gas, just in the last month prices have dropped by 25%. Even the best spin doctors would struggle to credit Rishi for this. Second, inflation management is the responsibility of the Bank of England through interest rate setting.
Of course, it doesn’t mean the Government has no control over our economic fortunes. Let’s take housing costs. Historically a bit part player in the inflation debate, today the contribution of housing rents and equivalent owner occupier costs to overall CPIH inflation now equates to roughly a sixth of total inflation. For historical context, at no point over the last 10 years has this contributed more than 0.5% to the country’s overall inflation. A rather concerning conundrum for the Prime Minister and one likely to scupper his target to bring overall inflation down to just 2%.
We all know what this looks like on the ground. In the year to May, rents across England rose by 5%. This is the fastest increase in over a decade. It’s now becoming the new norm for tenants to have multiple rent reviews in the space of a year.
I could recite till the cows come home many theories and policies that have demonstrated increased housing supply equals cheaper housing. Yet despite this, over the last 12 months, the government has stripped back many of its supply-side policy levers and has further doubled down on restrictive policies around Greenbelt etc.
In a rather roundabout way then maybe Rishi’s PR team do have a point. There are things within his control that he could be influencing and now that the housing crisis has managed to sneak into the big-picture economics, maybe – just maybe – Rishi, who’s supposed to know his way around this stuff, will finally sit up and take note.
