Inflation falls to 2.8%

Inflation's down, but rail fares are up, up, up.

According to the ONS, the Consumer Prices Index (CPI), Britain's headline measure of inflation, grew by 2.8% in the year to July 2013, down from 2.9% in June.

The statistics agency adds that:

The largest contributions to the fall in the rate came from air fares, plus price movements in the recreation & culture, and clothing & footwear sectors. A rise in petrol and diesel prices partially offset the fall.

Although inflation has fallen, it still far outstrips total pay increases. According to the latest figures available, pay rose by just 1.7 per cent in the year to May 2013. It has been over three years since average pay rose by more than inflation:

The RPI measure of inflation was also reported today: it rose to 3.1 per cent. Although RPI is no longer an official "National Statistic", a number of important prices are pegged to it. This month, it feeds through into national rail fares, which are allowed to increase by a maximum of the RPI for August plus 1 per cent. As a result, fares over the next year will rise by 4.1 per cent.

The latest figure for house price increases was also released today. Over the twelve months to June, prices rose by 3.1 per cent, outstripping inflation and widening the gap between those lucky enough to own property and the rest. But as ever, the housing story reveals the gap between parts of Britain. The ONS reports:

The year-on-year increase reflected growth of 3.3% in England and 4.3% in Wales, offset by falls of 0.9% in Scotland and 0.4% in Northern Ireland.

Within England too, there were vast discrepancies:

Annual house price increases in England were driven by London (8.1%), the West Midlands (3.1%) and the South East (2.9%). Excluding London and the South East, UK house prices increased by 1.0% in the 12 months to June 2013.

Yorkshire and the Humber actually saw a decline in house prices, by 0.2 per cent, while in the South West, prices remained stable with 0.0 per cent growth.

Piggy banks. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Why relations between Theresa May and Philip Hammond became tense so quickly

The political imperative of controlling immigration is clashing with the economic imperative of maintaining growth. 

There is no relationship in government more important than that between the prime minister and the chancellor. When Theresa May entered No.10, she chose Philip Hammond, a dependable technocrat and long-standing ally who she had known since Oxford University. 

But relations between the pair have proved far tenser than anticipated. On Wednesday, Hammond suggested that students could be excluded from the net migration target. "We are having conversations within government about the most appropriate way to record and address net migration," he told the Treasury select committee. The Chancellor, in common with many others, has long regarded the inclusion of students as an obstacle to growth. 

The following day Hammond was publicly rebuked by No.10. "Our position on who is included in the figures has not changed, and we are categorically not reviewing whether or not students are included," a spokesman said (as I reported in advance, May believes that the public would see this move as "a fix"). 

This is not the only clash in May's first 100 days. Hammond was aggrieved by the Prime Minister's criticisms of loose monetary policy (which forced No.10 to state that it "respects the independence of the Bank of England") and is resisting tougher controls on foreign takeovers. The Chancellor has also struck a more sceptical tone on the UK's economic prospects. "It is clear to me that the British people did not vote on June 23 to become poorer," he declared in his conference speech, a signal that national prosperity must come before control of immigration. 

May and Hammond's relationship was never going to match the remarkable bond between David Cameron and George Osborne. But should relations worsen it risks becoming closer to that beween Gordon Brown and Alistair Darling. Like Hammond, Darling entered the Treasury as a calm technocrat and an ally of the PM. But the extraordinary circumstances of the financial crisis transformed him into a far more assertive figure.

In times of turmoil, there is an inevitable clash between political and economic priorities. As prime minister, Brown resisted talk of cuts for fear of the electoral consequences. But as chancellor, Darling was more concerned with the bottom line (backing a rise in VAT). By analogy, May is focused on the political imperative of controlling immigration, while Hammond is focused on the economic imperative of maintaining growth. If their relationship is to endure far tougher times they will soon need to find a middle way. 

George Eaton is political editor of the New Statesman.