Analysis: From Pakistan to the US, Australia to Germany, the cost of living is rising to new highs and causing new hardships

Britain is not ‘going back to the 1970s’. Organised labour is far too cowed for that, and collective bargaining all but goneFor those versed in trade union folklore, the battle of Saltley Gate holds a special place. In 1972, workers from Birmingham factories downed tools to support striking miners, blockading a gasworks in the city where there was a huge stockpile of coking coal. Orchestrated by a young Arthur Scargill, the blockade successfully prevented lorries from collecting the coal.The action was pivotal in winning the strike for the miners, so it comes as no surprise that today, on the 50th anniversary of Saltley Gate, the Midlands branch of the TUC is holding a celebratory event. Scargill will be one of the speakers.Larry Elliott is the Guardian’s economics editor Continue reading...

Like many companies, Pickering’s Gin have faced supply chain disruption and rising prices during the pandemicThe low point for Matt Gammell, co-founder of Pickering’s Gin, came last spring when he got down to his last pallet of glass bottles.A longstanding order with a European glass maker was cancelled at short notice, and the Edinburgh-based spirit maker feared it might have to stop production. Continue reading...

Ursula von der Leyen says chips are ‘bedrock of our modern economies’ but the pandemic has exposed supply vulnerabilitiesThe European Union has announced a €43bn ($48bn) plan to overcome its dependency on Asian computer chip makers as governments and businesses around the world battle with a global supply chain crisis that experts believe could persist for much of the year.With consumers having to wait months for cars, dishwashers and other durables thanks to chip shortages, the bloc’s plan marks one of the most significant developments yet seen as a result of the tectonic shifts in the global economy set off by the coronavirus pandemic.In the US, Harley Davidson said its customers would have to bear the brunt of component price rises, and Starbucks said it was raising its prices for the third time since October, while FedEx’s air cargo arm was booming as businesses sought a way around bottlenecks.In Europe, the UK’s biggest private employer, Tesco supermarket, said food inflation will hit 5% this spring on the back of tighter supply, the price of beer was rising due a “vicious cycle of costs”, and truck maker Iveco reported protracted supply chain issues on Tuesday.In Australia, analysts at Commonwealth bank this week said Covid-induced supply chain disruptions and labour shortages continued to drive a big lift in price pressures for businesses, weakening business confidence. On the upside, small-town butchers were thriving thanks to supply shortages leaving supermarket shelves bare. Continue reading...

Public spending will rise by £76bn a year, requiring income and wealth to be taxed more efficiently and fairlyWealth taxes will be needed to fund a £76bn a year increase in government spending by the end of the decade, caused by an ageing population and more expensive healthcare, a thinktank has said.The Resolution Foundation said the UK was on course to see the size of the state match that of Germany by 2030, and warned new methods of raising money to pay for higher spending would be needed. Continue reading...

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Sunak still has time to make a ‘cash machine’ withdrawal to ease consumers’ energy bill painA cash machine. That was how Bernard Looney, the chief executive of BP, described his company back in November following last year’s sharp rise in global oil and gas prices. And the size of the company’s bank balance has now duly been revealed: profits just shy of £10bn last year – the highest in eight years.Clearly, these are windfall gains. BP had not expected a fivefold increase in the wholesale price of gas during 2021. Nor did it forecast that the cost of crude oil would currently be nudging its way towards $100 a barrel. Continue reading...

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Artists finding it harder than ever to make a living despite being part of one of the fastest growing industriesTen million jobs in creative industries worldwide were lost in 2020 as a result of the Covid pandemic, and the increasing digitisation of cultural output means it is harder than ever for artists to make a living, a Unesco report has said.Covid has led to “an unprecedented crisis in the cultural sector”, said Audrey Azoulay, the director-general of Unesco, the UN’s cultural body, in a foreword to the report. “All over the world, museums, cinemas, theatres and concert halls – places of creation and sharing – have closed their doors … Continue reading...

British Retail Consortium says rising energy prices will cause shoppers to tighten their purse stringsBritain’s biggest retailers have warned that soaring living costs will hit consumer spending after a mixed start to the year amid concerns about the Omicron variant.The British Retail Consortium, which represents more than 5,000 businesses across the country, said soaring household energy prices would mean consumers tightening their purse strings over the coming months, with a knock-on effect on high streets. Continue reading...

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In the midst of a cost-of-living crisis, the Bank’s governor has betrayed a familiar disdain for those struggling to copeWith just a few words, Andrew Bailey, the governor of the Bank of England, perfectly crystallised the state and the fate of the nation. Tone-deaf and socially oblivious, the voice booming out from the economic seat of power captured the history of the last lost decade.“We do need to see restraint in pay bargaining, otherwise it will get out of control,” Bailey told the BBC last week. As wages continue to fall, inflation is set to hit 7.25% in a couple of months, while pay will rise by far less. TUC leaders protest that “workers have been hammered and now they’re coming back for more.” “This is a very tough message to swallow when take-home pay is falling,” the Institute for Fiscal Studies director, Paul Johnson, tells me, pointing to a decade of lost pay – the longest period of pay stagnation in many years. Continue reading...

Worsening Sino-US ties, strict Covid rules and the crackdown on dissent have dented the territory’s fabled allure as a business hub, say expatsIn July 2018, Tara Joseph, president of the American Chamber of Commerce in Hong Kong, wrote an article in the best-known local English-language newspaper, the South China Morning Post, stressing to Americans the territory’s unique position as an Asian business hub.“The US is forgetting the differences between Hong Kong and China. Let’s remind them,” she wrote. “Hong Kong continues to have a robust and hearty infrastructure of values, practices and institutions that could not contrast more starkly with those of the mainland system.” Continue reading...

John Allan fears rate will rise quickly after big hike in energy costs filters through supply chainThe chairman of Britain’s biggest supermarket chain has warned that “the worst is yet to come” on food price inflation, as he predicted it will soon hit 5%.John Allan, who has chaired Tesco since 2015, told the BBC’s Sunday Morning programme that he was well aware people on very tight budgets were having to choose between food and heating. He said the idea that this was happening was very troubling. Continue reading...

Diana Wilkins spells out measures to curb energy consumption, and Andrew Knowles bemoans the privatisation of essential services. Plus letters from Hilary Lang and Dr Christopher SaitAmid all the discussion about how to mitigate the cost of energy price rises for households (Report, 3 February), there has been no mention of how to cut energy use in the first place. Rather than offset the cost by discounts, the money would be better used to reduce long-term energy consumption by making buildings as energy-efficient as possible and thereby helping to meet climate change commitments, too. It’s not rocket science.We can go a long way to improve the situation by ensuring lofts are insulated, windows are double-glazed and fit correctly, letterbox holes are plugged and external mailboxes fitted instead, draught excluders are fitted around wooden front doors, curtains have thermal linings etc. Continue reading...

Borrowing funds services and keeps taxes low, but true prosperity cannot be built on excessive cheap creditEconomics in Australia is frequently reduced to debates around government debt. Claims and counterclaims about profligacy and borrowings overlook several issues.First, the current scale of the debt is unprecedented outside of wars. At the end of 2021, global debt was US$295tn – 350% of everything the world produces in a year, compared with 282% in 2008. The major increase is in government debt, which has reached a record 99% of global output. US, eurozone and Japanese government debt is now at 103%, 98% and 257% of output respectively. Continue reading...

Washington and the west are inflicting brutal collective punishment on an already destitute people by freezing assets and aidThe war in Afghanistan did not end when US and UK troops left Kabul airport last year; it merely took a different, but still lethal, form.The response of President Joe Biden to the military humiliation inflicted on America by the Taliban has been a scorched-earth policy designed to cause the maximum amount of economic damage to what was already one of the world’s poorest countries. Continue reading...

Leaving the EU has effectively left this government unable to pay for its own ambition to ‘level up’ the country“I had a unique touch. Absolutely unique. They came up to me. They came up to me and said they were grateful. Champagne we had that night. The lot.”No, this was not Prime Minister Johnson speaking of the now notorious birthday party that was in breach of his own lockdown rules that we in the rest of the country were observing. This is Stanley, the character whose birthday it is in Harold Pinter’s macabre comedy The Birthday Party. Continue reading...

Policymakers fear a labor shortage is pushing up wages and prices. Wrong. Real wages are down and workers are strugglingThe January jobs report from the US labor department is heightening fears that a so-called “tight” labor market is fueling inflation, and therefore the Fed must put on the brakes by raising interest rates.This line of reasoning is totally wrong.Robert Reich, a former US secretary of labor, is professor of public policy at the University of California at Berkeley and the author of Saving Capitalism: For the Many, Not the Few and The Common Good. His new book, The System: Who Rigged It, How We Fix It, is out now. He is a Guardian US columnist. His newsletter is at robertreich.substack.com Continue reading...

While the Tories feud over Boris Johnson, the country edges deeper into an economic mire that will cause hardship for thousandsThe Bank of England last week published a set of grim economic forecasts that project inflation will peak at over 7% this year and real household incomes will fall by an average of £1,000 by the end of 2022. Meanwhile, the energy price cap will have risen by hundreds of pounds over the same period. Without another Covid wave, it is the cost of living crisis and particularly its impact on families already struggling to meet their rent, put food on the table and pay their heating bills that will dominate people’s lives in the next two years.Yet Boris Johnson remains mired in the depths of political crisis, debilitated in his role as prime minister, while his potential successors are more concerned with their campaigns to succeed him than addressing the challenges faced by the country. Westminster politics reached a new nadir when, in order to try to shift focus from his own woes, he falsely accused Keir Starmer of failing to prosecute the child abuser Jimmy Savile, a made-up allegation with no grounds in reality. Savile’s victims have spoken out about their distress at seeing their abuse politicised by the prime minister in this way and the unfounded slur prompted the resignation of his long-serving policy chief, Munira Mirza, who accused him of “scurrilous” behaviour. Continue reading...

Questions being asked over project as 35-acre site stands emptyIn May 2013, Boris Johnson announced a flagship £1.7bn scheme for Chinese investors to transform east London docks into the capital’s third financial district.It was the biggest commercial property deal he had announced during his time as London mayor and he pledged it would be a “beacon for eastern investors”. Continue reading...

Independent panel had chosen Oxford professor Jonathan Michie to be chair of government-funded research bodyThe business secretary, Kwasi Kwarteng, reportedly blocked the appointment of a leading academic to run a £200m economic research body because he was allegedly considered too leftwing.Jonathan Michie, the president of Oxford University’s Kellogg College and a professor of innovation and knowledge exchange, was selected by an independent selection panel to be executive chair of the government-funded Economic and Social Research Council (ESRC), reports the Financial Times. Continue reading...

Analysis: job vacancies are high but unions are weaker now – few sectors have enough post-Covid muscle to win big rises

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My wife, Gill Clisham, who has died aged 59 of heart failure, was the secretary of the National Institute of Economic and Social Research (NIESR) from 2001 to 2014. Though not an economist, she worked tirelessly throughout her career to ensure a wider understanding of the discipline and was instrumental in the inception and development of many successful initiatives, most notably the Westminster Economics Forum, a series of conferences she developed in partnership with the ESRC (Economic and Social Research Council).Gill was born in Wigan, the daughter of Marjorie (nee Barton), a health visitor, and Arthur McCaffery, a post office engineer. She arrived in the world following her mother’s previous eight miscarriages, and was valued by her parents as an only child. This prompted Gill to embrace life to the full. Continue reading...

The chancellor has announced a raft of measures to tackle the biggest fall in disposable income for three decades. How will you be impacted?Households are facing the biggest fall in disposable income for three decades, according to the Bank of England, with rising energy prices and other consumer inflation hitting incomes. The government has responded to the cost of living crisis with the announcement of a package of measures. Here we look at the impact on a range of different people. Continue reading...

Chancellor’s intervention unlikely to offset impact of rising energy bills on low-income households

Analysis: Chancellor says £9bn package will take sting out of UK’s economic woes – but is it enough?

Rise aims to combat soaring inflation despite faltering economic recovery and deepening cost of living crisisThe Bank of England has raised interest rates for a second time in three months, to 0.5%, as it warned that surging energy bills would push inflation higher than expected, to more than 7% by April.Warning that families faced the biggest fall in their disposable income for three decades this year, the Bank’s rate-setting monetary policy committee voted by a narrow majority to raise its base rate from 0.25% to tackle soaring inflationary pressures. Continue reading...

A one-off £200 discount and a rebate on council tax bills have been announced by Rishi Sunak in a £9bn package designed to 'take the sting' out of a £700-a-year rise in the average household’s energy bills in April

Report shows temp workers have few protections, even as staffing industry sees explosive growthHaley Hodges was working as a temp at a medical staffing agency in Iowa when she found out there were complications with her pregnancy and she was forced to cancel a few shifts. The cancellations led to her being placed on probation and her wages being slashed.The pandemic has led to a huge surge in temporary hiring, according to a report by the National Employment Law Project (NELP) and Temp Worker Justice that highlights the struggles many of those workers face.36% of workers reported they or their dependents relied on some form of government assistance while they worked through a staffing agency.24% of workers reported experiencing wage theft through a staffing agency, in which they were paid less than minimum wage, not paid overtime, or not paid the proper amount forhours they worked.17% of workers reported suffering an illness or injury on the job, and 41% of those workers said they had to cover the costs of medical care themselves.24% of temp workers said they have never received safety training before beginning a temp position, and 23% said they only sometimes received safety training.80% of workers reported interest in joining a worker organization such as a union to improve working conditions.71% of workers reported experiencing retaliation for raising workplace concerns to their management. Continue reading...

So-called missions to improve people’s lot nationwide require local knowledge and local powers if they are to be fulfilledFor two and a half years, it was like waiting for Godot. But the levelling up white paper is finally here. So was it worth the wait?First, the good points: the plan’s ambitions are clear, and there are things to praise within it. For one, the notable shift of focus to improving living standards rather than simply targeting growth. Legally binding “missions” to improve wellbeing across the country, close the gap in healthy life expectancy, narrow the attainment gap and boost wages and jobs are all a step forward. They show that the government has finally understood that its previous strategy of pursuing growth above all else failed to improve the lives and livelihoods of people in the country that most needed it.Miatta Fahnbulleh is chief executive of the New Economics Foundation

Bank of England to vote on potential rate change while inflation soars to 30-year highBritons are braced for the Bank of England to increase interest rates on Thursday as the central bank seeks to tackle price pressures that have pushed annual inflation to a 30-year high of 5.4%.Most City economists said the majority of members on the Bank’s rate-setting committee would increase the base rate from 0.25% to 0.5%, with the likelihood that at least two more increases would follow during 2022. Continue reading...

Director general to tell ministers they must raise skills, cut red tape and exploit opportunities of green economyBritain risks becoming trapped in a vicious cycle of low growth and high taxation unless the government takes radical steps to boost investment, raise skills, cut red tape and exploit the opportunities of the green economy, a leading business lobby group is warning.Tony Danker, the director general of the CBI, will use a speech on Thursday to criticise ministers for a lack of ambition as he outlines a five-point plan to restore the UK’s underlying growth rate to the levels seen before the financial crisis of 2007-09. Continue reading...

Michael Gold makes the case for membership of the European Economic Area, Simon Price outlines our slow economic decline after leaving the EU, and Dr David Mathieson urges Labour to rethink its policyAnand Menon rightly points out that the disastrous effects of Brexit on trade, tax rises and growth are now becoming apparent (Covid has been an easy scapegoat for economic disruption, but Brexit is biting, 31 January). He’s right, too, to note that Covid has become an easy scapegoat for economic disruption. However, the political realignment also brought about by Brexit seems to offer little chance for reopening the process of rejoining the EU, given that it resulted from a referendum whose legitimacy we all have to accept, however reluctantly.Membership of the European Economic Area could be the answer. Nothing on the referendum voting slip committed us to the hard Brexit to which we find ourselves condemned. Iceland, Liechtenstein and Norway are also outside the EU, but covered by the EEA agreement that guarantees their compliance with EU legislation on the single European market, competition and employment rights. Prof Menon observes that 57% of Britons now think the government is handling Brexit badly, so surely they too will increasingly want to find a way through. EEA membership would allow us to remain outside the EU while regaining some of the practical advantages of EU membership. It would also put us in a stronger position to rejoin the EU if and when the electorate so decided.

Philip Lowe may have the patience of a saint on interest rates but he doesn’t have a mortgage to pay“Patient” is a useful word for the reserve bank governor, Philip Lowe, when it comes to the timing of any interest rate rise. It’s vague and gives few clues as to how much time is left.After Tuesday’s RBA meeting, Lowe said the bank’s board “was prepared to be patient as it monitors how the various factors affecting inflation in Australia evolve”. He echoed the sentiment at Wednesday’s National Press Club address on the year ahead. Continue reading...

White paper’s promises range from raising pay to bringing up transport standards and promoting local pride

Food prices rose 2.7% but the biggest change was in items such as flooring, with prices up 0.9% compared with 0.2% in DecemberShop price inflation almost doubled in January to the highest level for nearly a decade as the cost of furniture and flooring shot up.Annual inflation of goods bought from retailers rose to 1.5% last month from 0.8% in December, according to the latest data from the British Retail Consortium (BRC) trade body and the market research company NielsenIQ, the highest level since December 2012. Continue reading...

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Savings built up during pandemic fall by two-thirds and consumer credit rises by £800m over yearConsumers are starting to run down the savings built up during the pandemic in order to sustain spending patterns threatened by higher inflation, Bank of England figures suggest.With the cost of living rising, Threadneedle Street data showed a marked drop in December in the amounts being deposited in savings accounts and national savings. Continue reading...

AG Barr blames rising production costs for price increase as it ups full-year sales and profit estimatesThe company behind Irn-Bru has revealed it is increasing its prices after its packaging, ingredients and energy-linked commodity costs jumped, as it raised its sales and profit estimates.AG Barr said owing to rising costs, which includes fruit and wages, it had put up prices “where appropriate” and signalled further price increases as it pointed to the UK’s inflation rate rising above 5%, the highest in decades. Continue reading...

Five bosses on how inflation has sparked worry, potential job layoffs and financial losses

EU countries have, on the whole, absorbed the shock of Brexit. But in Britain, trade is down – and prices are up

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Output is contracting as Beijing’s tough pandemic measures force some factories to shut down

The unpopular truth is that leaving the EU has not magically transformed Britain, but nor has it been calamitousPlenty of people – on the left as well as the right – believed George Osborne when he conjured up a dystopian vision of Britain after a vote for Brexit during the final weeks of the referendum campaign. The then chancellor said victory for leave would result in a “DIY recession”, the loss of 800,000 jobs, a weaker housing market and a stock market crash. Two years on from our date of departure from the EU, none of it has happened.Unemployment is lower than it was in 2016 and, although this is very much a mixed blessing, house prices are higher. Share prices have risen and until Covid-19 arrived there was no recession. That hasn’t halted the flow of gloomy predictions: Nissan would quit the UK, tens of thousands of City jobs would be lost to Paris, Frankfurt and Amsterdam. More recently, Brexit supply chain problems would mean a turkey-less Christmas and empty high street shelves in December. None of that happened either, and the wait for economic meltdown goes on.Larry Elliott is the Guardian’s economics editor Continue reading...

City economists expect increase from 0.25% to 0.5% on Thursday amid cost of living crisisThe Bank of England is poised to raise interest rates on Thursday amid growing concern over the pressure on households from high inflation in Britain’s cost of living crisis.City economists widely expect the central bank to increase its key rate from 0.25% to 0.5% in response to inflation hitting levels not seen for almost 30 years, with financial markets suggesting a 90% chance of an increase in borrowing costs. Continue reading...

There is much that could give relief – measures Labour has called for – but the government is more interested in distraction

Rising housing and energy costs plus higher taxes mean ministers have to come up with somethingGovernments underestimate the power of celebrity at their peril. First it was Marcus Rashford and his campaign for hungry children. Now it is Jack Monroe pointing out how the official inflation figure bears no relation to the real cost of living increases facing the neediest households.The footballer and the chef have performed an important public service by highlighting, in a way that official statistics and thinktank reports can’t, just how tough life is on or close to the breadline. Continue reading...

Observer writers examine whether the claims in the PM’s speech to parliament on 19 January actually hold waterJohnson detailed what he meant by “getting the big calls right” in a Commons speech on 19 January. He listed the decision to focus on the booster campaign in December, not opting to use the European Medicines Agency for vaccine procurement, and investing early in lateral flow tests and “cutting-edge drugs”. He also claimed that the UK had the “fastest booster campaign in Europe” and was “first to emerge from the Omicron wave”. Continue reading...