CONSUMER Prices Index (CPI) inflation has been driven up to 3.5 per cent in January by, amongst other factors, VAT returning to 17.5 per cent and higher petrol prices. This is from a rate of 2.9 per cent in December.
The Retail Prices Index (RPI) inflation rate which includes housing costs, and which was in negative territory just a few months ago, has shot up massively to 3.7 per cent in January, up from 2.4 per cent, overtaking the CPI index.
These big shocks to the nervous system of the capitalist class left the Governor of the Bank of England writing a letter of explanation to the Labour Chancellor Darling.
The Governor tried to maintain that the inflationary leap was temporary. Darling responded that he agreed with the Bank, while the TUC panicked and rushed out a statement saying ‘this is not a time to panic’.
TUC General Secretary Brendan Barber said ‘The inflation message is don’t panic. The rise today has more to do with what was happening a year ago than anything new in the economy, and is likely to fall back to its target range in due course. The real threat remains a double-dip recession, and boosting jobs and growth remain the most important priorities.’
He didn’t mention boosting wages. Barber is not worried as to how his seven million members, many of whom have had their wages frozen or cut, are going to feed their families.
His worry is just how capitalism can be propped up.
Even Darling had to say that the outlook for inflation was ‘subject to some uncertainty’.
In his letter to King, Darling wrote ‘Three such short-run factors have driven the current measured rate of inflation up. First, the restoration of the standard rate of VAT to 17.5 per cent is raising prices relative to a year ago.
‘Second, over the past year, oil prices have risen by around 70 per cent. That is pushing up petrol-price inflation significantly, which, in turn, is raising overall CPI inflation.
‘Third, although the exchange rate has been broadly stable over the past year, the effects of the sharp depreciation of sterling in 2007 and 2008 are continuing to feed through to consumer prices.’
About future inflation King was not too confident. He said ‘Inflation is more likely than not to fall back to the target in the second half of this year, as the short-run factors wane and the influence of spare capacity builds.’
This is definitely not a scientific judgement, it is more of a hope or a wish.
Darling replied to King that the Treasury also expected inflation to fall below 2 per cent by the end of 2010.
This is at a time when the euro is collapsing along with Greece, when oil prices are set to leap forward as the US beats the anti-Iran war drums, and where if the British government does not attack the working class in the way that it is being done in Greece sterling will collapse.
The ONS figures give a glimpse of the real crisis of British capitalism.
It said of the way the RPI index had rocketed from a minus position to plus 3.7 per cent ‘By far the largest upward contribution to the change in RPI annual inflation between December and January came from housing.’
The ONS says about production ‘For 2009 as a whole, overall production output was 10.2 per cent lower than in 2008. Within this, manufacturing output decreased by 10.5 per cent, mining and quarrying output fell by 10.3 per cent and electricity, gas and water supply output decreased by 7.8 per cent.’
This is the position of bankrupt British capitalism.
It is beyond rescue, even through the most vicious cuts of working class living standards ever.
The only way that its crisis can be resolved is through the building up of the revolutionary leadership of the WRP and the organisation of the British socialist revolution.