Inflation: It's worse than it seems

Low wage growth + High price growth = Misery.

Inflation around the government's target of 2 per cent - or even up at 3-4 per cent as it has been recently - does not sound too bad but people are complaining about making ends meet. Part of that is the squeeze on incomes which are rising more slowly than prices. Yet lurking behind the innocuous-sounding headline rates of change for inflation, and smooth words of reassurance from the Bank of England, is a harsher reality. Several items have more than doubled in price since the Bank was made responsible for inflation and interest rates in 1997, despite the headline measure only increasing by one-third in that period and the annual rate averaging barely 2 per cent.

Overlay from Timetric

In the early 2000s, earnings were rising faster than inflation but the pattern changed in 2007. Earnings growth has slowed dramatically while the rate of price increases has risen. Indeed, from the start of 2008, prices have risen by 15 per cent while average earnings have increased by only 5 per cent. It's no wonder that people are feeling the squeeze. The squeeze probably feels worse as we tend to notice the items which are rising in price strongly! The chart below shows all the top level components of the index - and a considerable variation in the rates of inflation among the different goods and services. Some components have fallen since 1997 - prices are actually lower than 15 years ago - while others have risen by much more than the average. By far the largest riser has been education - a combination of university fees (which rose in 2006), private school and nursery fees, and evening classes.

Overlay from Timetric

The story is more striking at the next level of disaggregation. Since 1997 (our charts have set May 1997=100), transport insurance has more than tripled in price and fuels (we show gas) have more than doubled. But more surprising are the price rises of some run-of-the-mill items such as postal services (up 94 per cent since 1997), petrol (+134 per cent), cigarettes (+137 per cent) and train/air tickets (+113 per cent). As if to prove the point that basics have been hit hard, chocolate, the jam on your bread, and fish and chips are among the largest risers in the food category and have risen by more than double the aggregate rate of inflation (up 36 per cent as measured by the CPI).

UK CPI: High Rising Components 1997-2012 from Timetric

Too sanguine? Bank of England chief Mervyn King (photo: Getty Images)

Lauren Buljubasic is an analyst at Timetric, provider of economic data visualisation and analysis

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Labour's establishment suspects a Momentum conspiracy - they're right

Bernie Sanders-style organisers are determined to rewire the party's machine.  

If you wanted to understand the basic dynamics of this year’s Labour leadership contest, Brighton and Hove District Labour Party is a good microcosm. On Saturday 9 July, a day before Angela Eagle was to announce her leadership bid, hundreds of members flooded into its AGM. Despite the room having a capacity of over 250, the meeting had to be held in three batches, with members forming an orderly queue. The result of the massive turnout was clear in political terms – pro-Corbyn candidates won every position on the local executive committee. 

Many in the room hailed the turnout and the result. But others claimed that some in the crowd had engaged in abuse and harassment.The national party decided that, rather than first investigate individuals, it would suspend Brighton and Hove. Add this to the national ban on local meetings and events during the leadership election, and it is easy to see why Labour seems to have an uneasy relationship with mass politics. To put it a less neutral way, the party machine is in a state of open warfare against Corbyn and his supporters.

Brighton and Hove illustrates how local activists have continued to organise – in an even more innovative and effective way than before. On Thursday 21 July, the week following the CLP’s suspension, the local Momentum group organised a mass meeting. More than 200 people showed up, with the mood defiant and pumped up.  Rather than listen to speeches, the room then became a road test for a new "campaign meetup", a more modestly titled version of the "barnstorms" used by the Bernie Sanders campaign. Activists broke up into small groups to discuss the strategy of the campaign and then even smaller groups to organise action on a very local level. By the end of the night, 20 phonebanking sessions had been planned at a branch level over the following week. 

In the past, organising inside the Labour Party was seen as a slightly cloak and dagger affair. When the Labour Party bureaucracy expelled leftwing activists in past decades, many on went further underground, organising in semi-secrecy. Now, Momentum is doing the exact opposite. 

The emphasis of the Corbyn campaign is on making its strategy, volunteer hubs and events listings as open and accessible as possible. Interactive maps will allow local activists to advertise hundreds of events, and then contact people in their area. When they gather to phonebank in they will be using a custom-built web app which will enable tens of thousands of callers to ring hundreds of thousands of numbers, from wherever they are.

As Momentum has learned to its cost, there is a trade-off between a campaign’s openness and its ability to stage manage events. But in the new politics of the Labour party, in which both the numbers of interested people and the capacity to connect with them directly are increasing exponentially, there is simply no contest. In order to win the next general election, Labour will have to master these tactics on a much bigger scale. The leadership election is the road test. 

Even many moderates seem to accept that the days of simply triangulating towards the centre and getting cozy with the Murdoch press are over. Labour needs to reach people and communities directly with an ambitious digital strategy and an army of self-organising activists. It is this kind of mass politics that delivered a "no" vote in Greece’s referendum on the terms of the Eurozone bailout last summer – defying pretty much the whole of the media, business and political establishment. 

The problem for Corbyn's challenger, Owen Smith, is that many of his backers have an open problem with this type of mass politics. Rather than investigate allegations of abuse, they have supported the suspension of CLPs. Rather than seeing the heightened emotions that come with mass mobilisations as side-effects which needs to be controlled, they have sought to joins unconnected acts of harassment, in order to smear Jeremy Corbyn. The MP Ben Bradshaw has even seemed to accuse Momentum of organising a conspiracy to physically attack Labour MPs.

The real conspiracy is much bigger than that. Hundreds of thousands of people are arriving, enthusiastic and determined, into the Labour party. These people, and their ability to convince the communities of which they are a part, threaten Britain’s political equilibrium, both the Conservatives and the Labour establishment. When the greatest hope for Labour becomes your greatest nightmare, you have good call to feel alarmed.