The chancellor’s position on lifting the state pension makes no sense | Nils Pratley

Sunak’s attempt to make a distinction between increases in pensions and wages fuels a sense of political favouritism

The government has got itself into a fine muddle on the triple lock pension guarantee, David Cameron’s gift-cum-bribe to older voters in 2010 that has ricocheted down the years. On the one hand, Boris Johnson and Rishi Sunak argue that awarding inflation-matching pay rises to public sector workers would risk an “inflationary spiral” and so should be avoided. On the other, the chancellor maintains that lifting the state pension by 10% – the figure likely to be produced by the triple lock formula – wouldn’t create inflationary pressures.

The position makes no sense. Income increases, whether delivered via pension payments or pay packets, all contribute to aggregate demand and spending capacity. Sunak’s attempt to make a distinction – “pensions are not an input cost into the cost of producing goods and services we all consume so they don’t add to inflation in the same way,” he said – only fuelled the sense of naked political favouritism. Teachers, to alight on the next bargaining battleground, aren’t manufacturing soap suds either.

Continue reading...

Soaring inflation pushes UK borrowing to £14bn in May

Interest on debt payment leaps 70% on a year ago to £7.6bn, a monthly record

Government borrowing was higher than expected in May at £14bn as soaring inflation sent interest payments on the UK’s debt to a monthly record.

The Office for National Statistics (ONS) said debt interest payments leapt 70% on a year ago to £7.6bn, the third highest debt interest payment made by central government in any single month and the highest payment in May on record.

Continue reading...

Brexit is making cost of living crisis worse, new study claims

EU withdrawal fuelling higher import costs and costing British workers nearly £500 a year, says Resolution Foundation

Britain’s cost of living crisis is being made worse by Brexit dragging down the country’s growth potential and costing workers hundreds of pounds a year in lost pay, new research claims.

The Resolution Foundation thinktank and academics from the London School of Economics said the average worker in Britain was now on course to suffer more than £470 in lost pay each year by 2030 after rising living costs are taken into account, compared with a remain vote in 2016.

Continue reading...

Network Rail in last-ditch bid to stop train strike causing chaos across UK

RMT union leaders say ‘no viable’ deals are on the table and walkout is set to go ahead, hitting tourism, sport and festivals

Network Rail bosses say they plan to hold more talks with union leaders today in a last-ditch attempt to avert the biggest strike on the railways for more than three decades.

More than 40,000 rail workers are due to walk out on Tuesday, Thursday and Saturday. Only about half of Britain’s rail network will be open on strike days with a very limited service on lines which are open.

Continue reading...

New strike chaos as teachers and NHS staff warn of action over pay

Rail unions set to walk out on Tuesday, as clashes loom over public sector pay offers falling short of inflation

A wave of 1970s-style economic unrest is threatening to spread from the railways across the public services, as unions representing teachers and NHS workers warn of potential industrial action over pay.

With the country preparing for rail strikes on Tuesday, Thursday and Saturday which will see half the network shut down, the biggest teaching union, the National Education Union (NEU), told the Observer that unless it receives a pay offer much closer to inflation by Wednesday, it will be informing education secretary Nadhim Zahawi of its plan to ballot its 450,000 members. The move could lead to strikes in schools in England in the autumn, the union said.

Continue reading...

Schools and libraries face huge cuts after soaring costs create £1.7bn shortfall

Exclusive: Emergency council cuts feared across England caused by inflation and higher energy costs

School-building projects, swimming pools and libraries have been earmarked for emergency funding cuts because town halls have been hit by an unexpected £1.7bn hole in their budgets, the Guardian can reveal.

Rampant inflation and soaring energy bills mean that council leaders have been forced to rip up financial plans from a few months ago, with higher than anticipated staff pay bills also contributing to their newfound deficits. Without help from Whitehall, it will leave them no option but to cut services and put up council tax next April.

Continue reading...

UK food price rises could hit 15% over summer, report says

Ukraine war, China lockdowns and Brexit help push up inflation, with products that rely on wheat worst hit

Food price rises in the UK could hit 15% this summer – the highest level in more than 20 years – with inflation lasting into the middle of next year, according to a report.

Meat, cereals, dairy, fruit and vegetables are likely to be the worst affected as the war in Ukraine combines with production lockdowns in China and export bans on key food stuffs such as palm oil from Indonesia and wheat from India, the grocery trade body IGD warns.

Continue reading...

Federal Reserve announces biggest interest rate hike since 1994

Fed confirms 0.75 percentage-point increase as Americans across country hit hard by rising prices and shortages of key items

With soaring inflation and the shadow of recession hanging over the United States, the Federal Reserve announced a 0.75 percentage-point increase in interest rates on Wednesday – the largest hike since 1994.

Until this week the Fed had been expected to announce a smaller increase. At a press conference, the Fed chair, Jerome Powell, said the central bank decided that a larger hike was needed after recent economic news, including last week’s announcement that inflation had risen to a 40-year high.

Continue reading...

Biden calls on US oil refiners to raise gas and diesel production to tackle prices

President notes that companies’ profits have tripled during time of war and calls for ‘immediate action’

Joe Biden on Wednesday called on US oil refiners to produce more gasoline and diesel, saying their profits have tripled during a time of war between Russia and Ukraine as Americans struggle with record high prices at the pump.

“The crunch that families are facing deserves immediate action,” the president wrote in a letter to major oil refiners. “Your companies need to work with my Administration to bring forward concrete, near-term solutions that address the crisis.”

Continue reading...

Markets brace for sharpest rise in US interest rates in almost 30 years

Federal Reserve expected to increase cost of borrowing by 0.75 percentage points to curb rising inflation

The world’s financial markets are bracing themselves for the sharpest rise in US interest rates in almost 30 years, as America’s central bank takes action to halt rising inflation.

After days of frenzied investor speculation and signs of growing central bank anxiety, the Federal Reserve is expected to increase the official cost of borrowing by 0.75 percentage points for the first time since 1994.

Continue reading...

Global markets plunge as Fed mulls biggest rate rise in decades

US investors fret about possible recession as S&P 500 plummets into bear territory and global markets feel aftershocks

Fears about a possible recession have pounded stock markets around the world amid reports that US Federal Reserve could raise interest rates by as much as 0.75% this week – its biggest single hike in borrowing costs for nearly 30 years.

As Wall Street’s benchmark S&P 500 index fell almost 4% on Monday into bear territory, prompting selloffs from Sydney to Shanghai, US central bank policy makers will begin a two-day meeting on Tuesday with expectations mounting that they will lift rates by at least 0.50%.

Continue reading...

Climate crisis is ‘battering our economy’ and driving inflation, new book says

Climatenomics lays out how ‘supply chain disruptions’ has become a euphemism for the effects of climate change

Forget Ukraine, coronavirus, corporate greed and “supply chain issues”, when it comes to inflation the climate crisis is the real, lasting, worry, according to a new book, and one that’s only likely to get worse.

Climatenomics, by former White House reporter and director of Environmental Entrepreneurs (E2) Bob Keefe, is a narrative account of how the climate crisis is fundamentally altering not just the US but global economies.

Continue reading...

Zero-growth warning for UK economy as petrol prices surge

OECD singles out cost of living crisis as a cause of Britain’s slide down growth league table

Boris Johnson’s attempt to reset his troubled premiership has received a double blow after petrol prices had their biggest daily rise in 17 years and a leading international thinktank said the UK economy would slow to a standstill next year.

Fears that Britain is heading for a prolonged period of 1970s-style stagflation intensified amid fresh evidence of the damaging impact of the war in Ukraine on the cost of living and growth.

Continue reading...

‘Hit an iceberg’: KFC switches to cabbage due to lettuce shortage

Fast-food chain temporarily changes recipe due to supply chain issues caused by floods in Queensland and northern NSW earlier this year

If you’ve noticed a twist in your Twister, or a bit more zing in your Zinger, it could be that Australia’s lettuce shortage is starting to bite.

KFC has advised customers that they are temporarily using a blend of lettuce and cabbage in stores in Victoria, NSW, Queensland, the ACT and Tasmania because of supply issues across the country.

Continue reading...

Most small firms fear long-term fallout from UK’s cost of living crisis

Half worry rocketing prices will cut spending, while three in four fear long-term damage to businesses

Three-quarters of small and medium-sized companies are worried about the long-term impact the cost of living crisis, soaring energy bills and rising inflation will have on their business, a survey has found.

Just over half (51%) of SMEs said they were concerned that rocketing prices would dent consumer spending, in response to Barclays’ SME Barometer, a quarterly survey of business sentiment conducted for the bank.

Continue reading...

Boris Johnson to stress work as the fix for cost of living crisis

Ministers remain unable to decide on ways to help as energy firm boss warns soon 40% could be in fuel poverty

Boris Johnson hopes to blunt calls for urgent action on the cost of living crisis by stressing that work is the best route out of poverty, as an energy firm boss warned that 40% of households could soon be in fuel poverty.

No 10 sources confirmed on Sunday that the prime minister will continue to throw the spotlight on the healthy state of the job market, in the face of the rising clamour to help families struggling with their bills.

Continue reading...

Average price of gas surpasses $6 a gallon for first time in California

The price is a record high for the state and follows a record high average price nationwide at nearly $4.59 a gallon

The average price of gas in California has surpassed $6 a gallon for the first time ever as fuel costs across the US reach record highs.

Drivers in the Golden state are paying more for a gallon of fuel than anywhere else in the country at an average of $6.06, an all-time high for California and the US, according to AAA. The national average is nearly $4.59 a gallon, also a record, increasing 10 cents since Monday. Meanwhile, in some rural regions of California prices are even higher – fuel costs more than $7 a gallon in Mono county in the state’s east.

Continue reading...

Australian federal election 2022 live: Plibersek says Albanese has a ‘tough job’ as polls tighten

AEC concedes some Covid-positive Australians ‘may not be able to vote’: prime minister responds after Labor announces policy costings; Covid and illness lead to drop in working hours; nation records at least 52 Covid deaths. Follow all the day’s developments live

Scott and Jenny Morrison are visiting Whitemore in the Labor-held electorate of Lyons in Tasmania this morning.

Brian Mitchell holds Lyons on a margin of 5.2%, although his buffer was inflated by the disendorsement of his Liberal opponent mid-campaign in 2019 for anti-Islamic social media posts. Morrison is still on the offence, seeking gains to offset expected losses elsewhere.

Continue reading...

Royal Mail ‘at crossroads’ as pandemic parcel boom fades

Postal service says it needs to adapt to post-Covid business world amid near-9% drop in profits and union pay battle

Royal Mail has warned that the company is at a “crossroads” and needs to urgently adapt to the post-pandemic environment as parcel deliveries, originally boosted by Covid lockdowns, continue to wane.

It piles further pressure on the postal company, as it struggles to reach a pay deal with unionised staff who are pushing for an inflation-based pay rise as the cost of living soars.

Continue reading...

Helping cash-strapped Britons won’t add to inflation, says CBI

Chief of business association calls for stimulus that aids ‘hardest hit’ with rising food and fuel bills

Tackling rising food and fuel bills will not add to inflation and people who are “the hardest hit” need help now, the head of the UK’s biggest business association has warned.

Official figures published on Wednesday revealed UK inflation soared to 9% in April – its highest level for more than 40 years – as the rising cost of gas and electricity pushed household energy bills to record levels.

Continue reading...