Inflation Out Of Control, Rate Rise On The Way

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INFLATION is on the rise with the CPI rate increasing from 3.1 per cent to 3.2 per cent, while the RPI rate rose from 4.5 per cent to 4.7 per cent.

This surge is on the eve of a 2.5 per cent increase in VAT in January – up to 20 per cent – an increase that will thrust inflation up to 8 per cent or more in the winter and spring months of 2011, especially, as a survey revealed yesterday, that many outlets are planning to use the VAT rise as a cover for bigger price increases.

The aptly-named Bank of England official, Mr Bean, observed yesterday that these ‘inflation expectations’ could lead to even higher prices and wages. He added that the Bank will watch inflation ‘like proverbial hawks’.

The problem with this approach is that while he and King are watching inflation rise like hawks, the mass of the people are going to be taking the pain, as a whole range of vital commodities soar beyond their reach, and their families begin to go without and suffer.

Bean raised his fears after official data showed a nine per cent rise in the price of materials and fuels used by Britain’s manufacturing industry in the last year, and an input prices rise of 0.9 per cent between October and November.

To add salt to these wounds the consultancy company KPMG reported that 60 per cent of retailers and consumer goods producers will increase prices over and above the 2.5 per cent VAT rise, using the VAT rise as a cloak for even bigger price increases.

An inflationary surge in both food, clothing and petrol costs drove up the rate of inflation in November.

There was a 1.6 per cent rise in food prices and 2 per cent in clothing costs – the highest increases for both sectors in an October to November period since records began.

The rise in food prices was driven by an increase in flour, breakfast cereals and poultry costs.

The City had predicted clothing prices to fall in November, as retailers introduced discounts earlier than expected. But the latest figures reveal the cost of garments increased, including men’s casual jackets, men’s casual short-sleeve shirts and women’s formal wear.

In the Bank’s calculations the main downward pressures on inflation between October and November came from recreation and culture, air transport and petrol. In fact, these ‘falls’ distort and cushion the RPI and CPI indices from reality. Workers have to eat every day. They travel by plane occasionally to holiday abroad, trips which many have now declared beyond their means.

Air fares were down 6.4 per cent, driven by a drop in prices on European routes. Petrol actually rose by 1.6 per cent in the period. Popular experience at the petrol pump suggests that petrol prices are rising by a penny a litre a day currently, creating a massive upward pressure on food prices.

However, even on bourgeois measuring scales, November was the third month in a row that prices have risen and the twelfth month in a row that inflation has come in above the Bank’s target of keeping inflation within one percentage point of 2 per cent.

The crisis of the UK economy is set to deepen. The runaway rises in inflation will have to be curbed by early rises in interest rates, that will push up mortgage interest rates and lead to large numbers of people losing their homes – all to save the bankers and the bosses from their own crisis.

Faced with this threat the trade unions must now take action.

They must draw up a trade union cost of living index and insist that wages rise automatically in line with monthly increases in the trade union cost of living index.

They must insist that there can be no more job losses, and the industries that cannot provide workers with employment are nationalised.

Above all they must organise to bring down the coalition to bring in a workers government and socialism.