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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

Poorest UK households facing highest inflation rates as cost of living crisis deepens – as it happened

Inflation United Kingdom United States Bank of England Bernard Jenkin ​​Rishi Sunak
Rising food and energy pushed UK inflation to a 40-year high, with poor families facing the hardest squeeze
Rising food and energy pushed UK inflation to a 40-year high, with poor families facing the hardest squeeze Photograph: Daniel Leal/AFP/Getty Images

That’s all for today.

Here’s our latest news story on UK inflation hitting a 40-year high, as rising cost of gas and electricity, and pricier food, hit households.

Here’s our analysis on the likelihood of more help from the government:

An insider’s view of how shoppers’ behaviour has changed:

And an account of how pensioners are struggling as prices rise:

Our Politics Liveblog is still tracking the political developments around the UK’s cost of living crisis:

And our summary of the main events is here.

Here are the rest of today’s stories:

Ouch. Shares in US retailer Target have fallen by almost a quarter today, after its financial results disappointed Wall Street.

Target reported that its net income had halved in the first quarter, hurt by high freight costs and supply chain disruptions. The retailer also saw lower-than-expected sales for discretionary merchandise like TVs.

Chief executive Brian Cornell explained:

“Throughout the quarter, we faced unexpectedly high costs, driven by a number of factors resulting in profitability that came in well below our expectations, and well below where we expect to operate over time.”

UK pensioners on the cost of living crisis

Several Guardian readers have got in touch today to explain how soaring inflation is hurting them:

Suzanna, a retired teacher from London, has changed what she eats to help reduce her spending.

“The cost of food means I buy less and have a basic diet,” she says. “I don’t [use the oven], because you worry about how much energy does the oven use. I normally eat very healthily. I’m going round looking at things that maybe I can just stick in the microwave because they’re cheaper. Even boiling vegetables, it takes quite a long time.”

Ken Taylor, 72, a retired salesperson from Sherburn in Elmet, North Yorkshire, has begun keeping a list of everything he spends.

“I’ve been budgeting for every penny,” he says. “I’ve got a section for the house, I’ve got a section for food, the car, food for the dog, so I can see where the money’s going. And it does go, just about all of it, every month.”

His monthly income from a state pension and a small work pension is £1,188, and his outgoings for essentials are £1,096, leaving £92 for any additional expenses.

And with food prices rising, and the energy cap likely to jump again in October, he says:

“It will not be long before I do not have enough to last the month”

Here’s the full piece:

Google’s Russian subsidiary plans to file for bankruptcy after the authorities seized its bank account, making it impossible to carry on operations, a Google spokesperson said on Wednesday.

Reuters has the story:

Alphabet Inc’s Google has been under pressure in Russia for months for failing to delete content Moscow deems illegal and for restricting access to some Russian media on YouTube, but the Kremlin has so far stopped short of blocking access to its platforms.

A Google spokesperson said:

“The Russian authorities seizure of Google Russia’s bank account has made it untenable for our Russia office to function, including employing and paying Russia-based employees, paying suppliers and vendors, and meeting other financial obligations.

“Google Russia has published a notice of its intention to file for bankruptcy.”

A TV channel owned by a sanctioned Russian businessman said in April that bailiffs had seized 1 billion roubles ($15 million) from Google over its failure to restore access to its YouTube account, but this is the first time the U.S. tech giant has said its bank account as whole has been seized.

Google did not immediately confirm whether it was the seizure of those funds that led to its intention to file for bankruptcy, or whether other seizures had occurred.

More here: Google’s Russian subsidiary to file for bankruptcy after bank account seized

Stock markets have slipped back today, as recession concerns have weighed on investors.

In London, the FTSE 100 index is down 40 points, or 0.5%, in mid-afternoon trading at 7480, with retailers such as Ocado (-7.7%), JD Sports (-3.75%), and B&M (-3.65%) among the fallers.

Wall Street has dropped too, with the S&P 500 and the tech-focused Nasdaq both down around 1.6%.

Shell boss faces investor rebellion over £13.5m pay package

The chief executive of Shell is facing an investor revolt over his £13.5m pay packet, as oil and gas firms battle growing calls for a windfall tax on their profits.

The investment adviser Pirc has urged shareholders to vote against Ben van Beurden’s pay packet at next week’s annual general meeting, calling it “excessive”.

The Dutchman picked up £6.3m last year, up from £5.2m a year earlier. The company has given him a 3.5% increase in salary to £1.42m and he has the opportunity to land a further £12.1m in cash and shares by hitting company targets.

Pirc said the chief executive’s salary was in the top 25% of a peer comparator group “which raises concerns over the excessiveness of their pay”.

It also called for “the fallacy of alignment with shareholders to be retired”. Companies typically argue that large share awards incentivise executives to increase the stock price for investors. Here’s the full story, by my colleague Alex Lawson.

Keir Starmer urged Boris Johnson to “make up his mind” and impose a windfall tax on North Sea energy firms, adding that the prime minister is “choosing to let people struggle” by delaying any further action.

During yet another prime minister’s questions dominated by the cost of living, Starmer used all six of his questions on the single subject. He lambasted Johnson over his refusal to use a windfall tax to reduce energy bills, saying this would inevitably happen, and the “vacillation” was causing significant harm.

“Doesn’t he see that every single day he delays his inevitable U-turn – he’s going to do it – he’s choosing to let people struggle when they don’t need to?” the Labour leader said in the Commons.

The price pressures pushing up UK inflation are unlikely to ease until 2023, predicts Paul Hollingsworth, chief European economist at BNP Paribas Markets 360.

He writes:

  • Looking ahead, inflation is likely to remain elevated for much of 2022.

  • The contribution from energy will of course depend on the evolution of the next price cap change in October, but we expect another sizeable (30%+) increase.

  • At the same time, the increase in food price inflation likely has further to run, on the back of both prior rises in wholesale prices but also additional disruptions created by the Russia-Ukraine conflict.

  • Supply disruptions exacerbated by recent lockdowns in China makes a significant easing of core goods price inflation also unlikely in the short term.

That means the cost of living crisis will deepen, hitting real incomes and consumption growth over the next few quarters.

Hollingsworth adds:

That ‘stagflationary feeling’ is likely to persist for some time yet, then, even if we do not envisage a material weakening in the labour market that would be required for a fullblown recession.

In the US, the housing market appears to be cooling as rising interest rates and building costs hit demand.

Housing starts (the number of new building projects which got underway) dipped by 0.2% in April, with March’s reading revised down too.

More notably, the number of permits for future homebuilding dropped 3.2%.

Mortgage rates have been climbing, as the Federal Reserve began the process of raising interest rates to cool US inflation from a 40-year high.

Costlier building materials have also been cited as a factor hitting the market.

Updated

This is a handy chart, showing how the UK’s inflation rate is higher than in most other major economies:

The only change is that Canada’s latest inflation report is just out, and it shows inflation inched up to a new 31-year high of 6.8%.

A branch of Lloyds Bank.
A branch of Lloyds Bank. Photograph: Geoffrey Swaine/REX/Shutterstock

Lloyds Banking Group has announced plans to close a further 28 branches in Britain this year, just two months after axing 60 outlets.

The move have been criticised by employee union Unite, who said the closure of 20 Lloyds branches and 8 Halifax-branded branches between August and November this year was “inexusable”.

Vim Maru, group retail director at Lloyds, in a statement that fewer customers were visiting branches:

“Branch visits have been falling significantly for several years now, and this trend is continuing.

Unite said it would impact 69 full-time roles, while Lloyds said it would aim to support staff impacted and move those who wanted to stay to a new role.

Caren Evans, Unite national officer said:

“The branch closure announcement today that another profit making financial institution is failing to consider the needs of consumers and staff beggars’ belief.

This news is another example of a bank choosing to walk away from the communities who need access to banking.

Summary

A quick recap, after a busy morning.

Economists have warned that poorer households are now suffering double-digit inflation, as the cost of living crisis intensified.

UK inflation jumped in April to a 40-year high of 9%, with energy bills soaring after the Ofgem price cap was lifted.

But both Resolution Foundation, and the Institute for Fiscal Studies, highlighted that poorer households have seen the sharpest jump in inflation.

Resolution said the government must act, by uprating key benefits such as Universal Credit, or by a “radical increase in the ambition” of the Warm Homes Discount scheme.

Jack Leslie, senior economist at the Resolution Foundation, says:

“Inflation reached a 40-year high last month off the back of a sharp rise in energy bills and the highest food price inflation in a decade. These recent drivers of inflation mean that lower-income families are facing the most severe cost pressures, with their inflation rate already hitting double digits.

“Inflationary pressures are likely to continue to grow through the year as the effects of higher energy prices continue to work their way through businesses and into consumers’ pockets.

The IFS warned the UK faces a prolonged period during which poorer households are facing rates of inflation even higher than the headline figures would suggest.

IFS director Paul Johnson said the UK was witnessing a return to “swiftly growing inequality”.

Gas prices have almost doubled in the last year, the report showed, while food inflation was a 10-year high of 6.7%, with double-digit increases for pasta, poultry and milk.

Citizens Advice reported that so far in May it has referred more than 750 people a day to food banks.

The rise led to fresh calls for an emergency budget, and warnings from one union of strike action unless wages kept pace with rising prices.

The Institute of Directors warned UK inflation is “shockingly high”, while the CBI said
it is ‘critical’ that the government helps people facing real hardship now in this ‘historic’ squeeze.

UK factories raised their prices by 14% in April, compared to a year ago, which will push up consumer prices in the months ahead.

The pound fell back, on concerns that the UK could slide into recession.

Motorists faced another hit at the pumps, with the price of petrol in the UK hitting a new alltime high.

Updated

NIESR, the economic research group, has calculated that underlying inflation (ignoring the highest and lowest 5% of price moves) rose to 5.7% in April from 5.6% in March.

It adds:

Underlying inflation increased in 7 of the 12 UK regions in April. London’s underlying annual inflation rate remained the highest at 6.7 per cent, compared to Wales which had the lowest rate again at 4.6 per cent in April.

NIESR also warns that interest rate rises risk pushing the UK deeper into recession:

Consumers will continue to be battered by the storm of a higher cost of living during a time when real wages are being significantly eroded.

We continue to expect the Bank of England to raise interest rates through 2022, however there are significant risks that the Monetary Policy Committee may deepen the recession NIESR expects at the end of 2022 if rates are hiked rigorously.

In other news, Netflix is cutting 150 jobs as the streaming company seeks to reduce its costs after revealing it expects to lose millions of subscribers in the first half of the year.

The widely expected cuts are mostly focused on its US operation, affecting employees in its sprawling film and TV divisions.

This month, Netflix’s market value was slashed by almost $60bn as investors panicked that the decade-long boom in the streaming sector had come to an end, after the company reported its first loss of subscribers in 10 years.

Larry Elliott: Treasury will find some help with rising inflation

Chancellor Rishi Sunak will have to produce more help for those worst hit by rising inflation, predicts our economics editor Larry Elliott:

Inflation is likely to fall back a bit in the coming months but the respite will be modest and temporary. There will be further increases in interest rates from the Bank of England as it seeks to prevent inflation becoming embedded in the economy, and renewed calls on Rishi Sunak to increase support for those most affected by rising prices.

In his response to the latest inflation figures, the chancellor sought to deflect criticism of the government over its handling of the cost of living crisis by noting other countries were facing similar pressures.

“We cannot protect people completely from these global challenges but are providing significant support where we can, and stand ready to take further action,” Sunak said.

But blaming global factors is not going to prevent the calls for action from growing louder and the words “stand ready” are a clear sign that the Treasury will come up with something to help those most affected by rising inflation. The only questions are how generous the support package will be, and when it will arrive.

Here’s his full analysis:

PMQs live: Boris Johnson faces Keir Starmer as inflation soars

The cost of living crisis is dominating the UK political landscape, and likely to feature heavily at Prime Minister’s Questions at noon today.

Andrew Sparrow’s Politics Live blog will be tracking the action, as well as all the political reaction to April’s inflation surge:

It already flags that union leaders have backed Labour in calling for an emergency budget, and that Unite union has said it will use strike action if necessary to protect workers’ pay as inflation rises:

Sharon Graham, its general secretary, warned:

Unite’s answer to the current crisis is that employers who can pay decent wages but won’t will face industrial action. I can tell you that we don’t intend to shift from that.

Updated

Pound falls back amid recession worries

Sterling has dropped back towards its lowest level since the start of the pandemic, amid concerns that the UK could drop into recession soon.

After rallying almost two cents yesterday after unemployment hit a 48-year low, the pound has lost almost a cent back to $1.24. Last week it dropped through $1.22, the lowest since March 2020.

Today’s inflation reading, although certainly bleak, wasn’t quite as bad as the 9.1% CPI reading which City expected,. That may mean the Bank of England won’t raise interest rates as fast as thought.

At the same time, price pressures are adding to the strains on the UK economy.

Chris Beauchamp, chief market analyst at IG Group, explains:

Today’s CPI confirms the bind in which the BoE finds itself, and shows Andrew Bailey was right to be so gloomy. The squeeze on consumers is getting worse, and with factory gate prices even higher it will get worse still.

But the BoE knows it will struggle to fight inflation with the economy so vulnerable to higher rates and a potential recession. Hence the weakness in sterling this morning.

Shortages of workers, as well as rising costs of energy and ingredients, drove food and non-alcoholic drinks price inflation to a 10-year high of 6.7%.

So explains Karen Betts, chief executive of the Food and Drink Federation:

“This is a very worrying time for many households, and food and drink businesses are continuing to do everything they can to contain food-price inflation. However, the pressures on both large and small businesses are immense.

Ingredient price rises have been relentless for more than a year now, as a result of pressures in the global supply chain caused by the COVID-19 pandemic. The war in Ukraine, with both Ukraine and Russia important suppliers of commodities like wheat and food oils, as well as energy and fertiliser, has made the situation worse.

Our sector is, in particular, impacted by the significant rises in energy costs seen this year – with over 60% of food and drink manufacturers reporting energy price rises are impacting their operations. Meanwhile, wages are rising too with labour shortages right across our sector taking hold.

Last month, MPs warned that labour shortages largely caused by Brexit will “permanently” push up food prices and cause irreparable damage to British farmers unless the Government stepped in.

The Royal Statistical Society is concerned that the CPI inflation report doesn’t capture the impact of rising costs on low-income households.

It is calling for a new measure of inflation, the “Household Cost Indices” which unlike the CPI is designed to capture the experiences of all households

Stian Westlake, chief executive of the Royal Statistical Society, explains:

“Today’s CPI figures will not be a surprise to anyone as household costs continue to rise. The problem remains that CPI was never designed to capture the actual experiences of households on what they pay out. By looking at overall spend in the economy, it gives greater weight to those on higher incomes.

“As the cost of living crisis continues, with the poorest being most impacted by rising costs, we need a measure of inflation that captures the experiences of all, so the right policy decisions can be made.”

Anti-poverty campaigner Jack Monroe has highlighted this issue too, with her plans for the excellently-titled Vimes Boots Index to track inflation within basic, essential items.

The ONS is working on plans to increase the number of price points used to track inflation dramatically each month from 180,000 to hundreds of millions, using prices from supermarket checkouts.

The UK is experiencing a return to “swiftly growing inequality”, with City workers getting large bonuses and poorest families hit hardest by inflation.

That’s the verdict of Paul Johnson, head of the IFS, who cites this morning’s analysis showing low-income households suffer the highest inflation rate.

In February, British bankers started collecting the biggest bonuses since before the 2008 global financial crisis, after a boom in takeover deals in 2021.

There could be a “couple of bumps to get through” before inflation settles down, a Cabinet minister has warned.

International Trade Secretary Anne-Marie Trevelyan told an event at Bloomberg’s headquarters in London that countries were “facing a global battle against inflation”.

Answering a question about inflation and the cost of living after her speech on green trade, she said (via PA Media):

“This is something we have to tackle across the board.

“And the worry we always have is that inflation tends to have two bumps to it.

“You have the initial one that is caused by this energy spike and immediate global rise but what can follow is the longer term impact and indeed through food production and particularly with disruption to Ukraine.

“So we know that we will probably have a couple of bumps to get through before we will see, we hope, stabilisation and a reduction as the energy crisis settles.”

Labour will force a vote in parliament on an emergency budget to help with the cost of living crisis, after inflation soared to 9% in April. Here’s the story:

April’s surge in inflation means many workers are facing a real terms pay cut - especially in the public sector.

Yesterday’s jobs report showed that basic pay (excluding bonuses) rose by just 4.2% per year in January-March, while total pay jumped 7%, lifted by bonuses in the finance and construction sectors.

Total pay growth in the public sector was just 1.6%, compared to 8.2% in the private sector.

Mike Clancy, general secretary of the Prospect union, says the government do more, including ending the real terms pay cuts for public sector workers.

“These eye-watering inflation figures will leave workers right across the country making impossible choices about what they cut from family budgets just to make ends meet.

“It is just not good enough to suggest that workers must bear the cost of this, while pay inequality widens with the top 1% of earners seeing sharp increases in pay last month.

“The government need to get real about the cost-of-living crisis, with an emergency budget to provide more support with energy bills and an end to real terms cuts in pay for public sector workers.”

Inflation in the eurozone was slightly less hot than first estimated last month, but still a record.

Eurozone CPI has just been revised down to 7.4% in April 2022, from 7.5% initially, which matches March’s reading.

The lowest annual rates were registered in France, Malta (both 5.4%) and Finland (5.8%). The highest annual rates were recorded in Estonia (19.1%), Lithuania (16.6%) and Czechia (13.2%).

Petrol prices hit record high

The price of petrol in the UK has hit a new alltime high, adding to the cost of living pressures.

Petrol’s average pump price across the UK hit a new record of 167.64p a litre on Tuesday.

The previous record of 167.30p a litre was set on 22 March, the day before the Chancellor’s Spring Statement when Rishi Sunak announced a 5p/litre cut to fuel duty.

Motoring bodies warned that retailers were not passing on that cut in full.

Diesel prices continue to climb to new highs, reaching an average of 180.9p per litre on Tuesday.

The AA has calculated that the cost of filling the typical 55-litre has risen from £70.61 to £92.20 for petrol, over the last year, and from £71.94 to £99.48 for diesel.

Luke Bosdet, the AA’s fuel price spokesman, says:

“Despite his best efforts, the Chancellor must feel like King Canute having tried to reverse the tide of rising pump prices. At least though, he can say that UK drivers would be £2.75 a tank even more worse off now had he not tried to take action in March.

He hasn’t been helped by a fuel trade that, despite a 16p-a-litre fall in petrol costs that coincided with the Spring Statement, couldn’t even pass on the full 5p fuel duty cut and the 1p VAT reduction that it brought with it.”

RAC fuel spokesman Simon Williams said the move will add to the UK’s worsening cost-of-living crisis.

While the average price of both petrol and diesel would have been far higher without the historic duty cut, it’s also unfortunately the case that drivers haven’t seen the full benefit at the pumps due to major retailers upping their margins.

As flagged earlier, business secretary Kwasi Kwarteng has warned petrol bosses the competition regulator is monitoring the situation:

UK house price growth slowed in March, although the price of the average property still hit a fresh record.

The Office for National Statistics reports that:

  • UK average house prices increased by 9.8% over the year to March 2022, down from 11.3% in February 2022.
  • The average UK house price was £278,000 in March 2022, which is £24,000 higher than this time last year.
  • Average house prices increased over the year in England to £298,000 (9.9%), in Wales to £206,000 (11.7%), in Scotland to £181,000 (8.0%) and in Northern Ireland to £165,000 (10.4%).
  • London continues to be the region with the lowest annual growth at 4.8%.

The ONS also found that private rental prices paid by tenants in the UK rose by 2.7% in the 12 months to April 2022, up from 2.4% in the 12 months to March 2022.

Inflation: the full story

UK inflation soared to 9% in April – its highest level for more than 40 years – as the rising cost of gas and electricity pushed household energy bills to record levels.

The escalating cost of food and transport also contributed to the rising cost of living, deepening the crisis affecting millions of low- and middle-income families.

Business groups said all sectors of industry and commerce were suffering from the steep rise in energy and fuel costs, with many facing a similar shock to their finances as seen during the pandemic but without the same level of government support.

The Office for National Statistics said the 54% increase in the energy price cap in April, which took the average annual gas and electricity bill close to £2,000, was the main reason for the jump in the consumer prices index from 7% in March.

Average petrol prices rose to a record 161.8p a litre in April 2022 from 125.5p a year earlier. Diesel was another factor behind the increase in the consumer prices index from 7% in February after the average cost at the pumps hit a record high of 176.1p a litre, leading to an average increase over the last 12 months in motor fuels of 31.4%.

The end of a temporary VAT cut for the hospitality industry also pushed up prices after restaurants and hotels said they were unable to cushion customers from the increase in the tax from 12.5% to 20%.

A steep fall in the value of the pound on foreign exchange markets piled further pressure on businesses by adding to the cost of imports. Sterling has slumped since last month, from more than $1.30 to $1.24 after hitting $1.22 last week. More here.

Jane Jones, a supermarket worker from Flintshire, Wales, has told the Guardian how shoppers have been hit by rising inflation.

Many people have been arriving in the evening to pick up reduced short-dated food, and more have been asking cashiers to stop scanning good when their bill hits £40.

There’s also an increase in people shoplifting everyday items - even baby milk, showing the struggle faced by some families.

She explains:

We used to get shoplifters stealing high-value things to sell on, which is not uncommon. Now it’s people stealing everyday things, doing their weekly shop and trying to walk out without paying.

Baby milk has never been security tagged but now it is, so people can’t steal it. It was something that never would happen before but people are quite desperate.

Here’s the story:

Resolution: Inflation hits double digits for low-income families

The Resolution Foundation is urging the government to help poorer families now, after calculating that those on lowest incomes are now suffering double-digit inflation, while richer households are less badly hit.

Resolution’s analysis shows that inflation is now 10.2% for the poorest tenth of households, significantly higher than for the richest tenth of households (8.7%, it calculates).

As the IFS flagged earlier, this is because lower income households spend a greater share of their family budgets on energy bills, where prices are rising sharply.

The Foundation says that while everyone is affected by the tightest squeeze in household incomes in half a century, low-income households are facing the toughest time, and should therefore be the top priority for further support.

And the best way to do that is by uprating key benefits such as Universal Credit, or by a “radical increase in the ambition” of the Warm Homes Discount scheme, to cut bills for poorer families.

Benefits only rose by 3.1% in April, in line with last September’s inflation reading - so are lagging inflation.

Jack Leslie, senior economist at the Resolution Foundation, says the government must provide “further targeted support” for those lower income families at the sharp end of this crisis.

“Inflation reached a 40-year high last month off the back of a sharp rise in energy bills and the highest food price inflation in a decade. These recent drivers of inflation mean that lower-income families are facing the most severe cost pressures, with their inflation rate already hitting double digits.

“Inflationary pressures are likely to continue to grow through the year as the effects of higher energy prices continue to work their way through businesses and into consumers’ pockets.

“Nobody knows how long these pressures will last, or how workers will respond via higher wage demands, which is why the Bank faces a tough judgement on the pace and scale of interest rate rises.

Leslie has written a Twitter thread, explaining how we face an economic crisis:

Rising food prices hit households

Sunflower oil shelves are seen partially empty in Tesco this month, as the Ukraine war leads to shortages and surging prices.
Sunflower oil shelves are seen partially empty in Tesco this month, as the Ukraine war leads to shortages and surging prices. Photograph: Finnbarr Webster/Getty Images

Food and non-alcoholic prices have risen at the fastest rate since 2011, hitting families, and pushing CPI inflation to 9%:

That includes double-digit increases for some food items such as pasta (+10.4% in the last year), lamb (14.3%), beef and veal (+10.2%), poultry (+10.1%), oil and fats (+14.5%) and milk.

That’s on top of the jump in costs for petrol (+28.9%), electricity (+53.3%) and gas (+95.5%).

Economist Richard Ramsey has crunched through today’s inflation report, to show the factors pushing prices higher.

Updated

Here’s a breakdown of the main factors that drove up inflation:

  • Food and non-alcoholic beverages: 6.7%
  • Alcoholic beverages and tobacco: 4.4%
  • Clothing and footwear: 8.3%
  • Housing, water, electricity, gas and other fuels: 19.2%
  • Furniture, household equipment and maintenance 10.5%
  • Health: 2.3%
  • Transport 13.5%
  • Communication 2.8%
  • Recreation and culture 5.9%
  • Education 4.5%
  • Restaurants and hotels 7.9%
  • Miscellaneous goods and services 2.9%

Retail price inflation, another measure of rising prices, jumped to a 40-year high of 11.1% in April.

RPI is a discredited measure (the ONS say it’s a very poor measure of general inflation), but unlike CPI it includes mortgage interest payments, so it measures changes in house prices and interest rates.

Despite losing its status as a National Statistic, RPI still has some significant uses. That includes setting the interest rate on index-linked government bonds, and for annual changes in costs such as train tickets, mobile phone tariffs, and the interest rate on student loans.

Unite general secretary Sharon Graham has hit back at demands for wage restraint, saying that calls for reflection should be directed to FTSE 100 CEOs:

“The alarm bells are ringing very loudly now. Earnings are being pummelled, the government is, shamefully, turning its back on those in need and employers are squeezing wages. So, we will absolutely take no more lectures on pay restraint from the millionaire governor of the Bank of England.

“If Andrew Bailey wants to lecture anyone about belt-tightening, he should direct his attention to the CEOs of the UK’s top 100 companies who have seen their wages swell by an average of 34 per cent to an astonishing £4.1 million a year. Ask them to pause to reflect about the scale of their corporate greed.

IFS: Poorest households facing even higher inflation rates

Inflation is even higher than 9% for the poorest families in the UK, because they spend more of their total budget on gas and electricity.

The Institute of Fiscal Studies, the leading economics thinktank, has calculated that the bottom 10% of the population in terms of income faced a rate of inflation rate of 10.9%.

That’s 3 percentage points higher than the inflation rate of the richest 10%.

Most of this difference is because poorest households spend 11% of their total household budget on gas and electricity, compared to 4% for the richest households, the IFS says.

UK inflation rates by income band
UK inflation rates by income band Photograph: IFS

Heidi Karjalainen, research economist at the IFS said this means a large drop in real terms income for poorer households:

”Inflation hit 9% in April. Because so much of the increase was driven by the increase in the gas and electricity tariff cap, poorer households who spend more of their budgets on gas and electricity, faced an even higher rate of inflation. We estimate that the poorest 10% of households faced an inflation rate of 10.9%. State benefits only increased by 3.1% in April. This means big real terms cuts to the living standards of many of the poorest households.

“Continuing pressures, such as the war in Ukraine, are likely to push Ofgem’s October tariff cap, as well as other prices including food prices, even higher later this year. We are likely to be in a prolonged period during which poorer households are facing rates of inflation even higher than the headline figures would suggest.”

Figures from the advice charity Citizens Advice give an insight into how many households are struggling with inflation.

It said so far in May it has referred more than 750 people a day to food banks.

So far this year it has supported almost 30,000 people with energy debts - 26% more than in 2021 - and dealt with more cases of people unable to top up their prepayment energy meter than it did in the whole of last year.

Its chief executive, dame Clare Moriarty, said:

“The warning lights could not be flashing brighter. The government must bring in more targeted support to help people cope with this mounting crisis.”

Moriarty said there were desperate stories behind the headline figures, including:

“people washing in their kitchen sinks because they can’t afford a hot shower; parents skipping meals to feed their kids; disabled people who can’t afford to use vital equipment because of soaring energy bills.

The FT’s Chris Giles points out that the UK now has the highest inflation rate among G7 countries, and among the highest of any advanced economy in the world.

Liz Truss, the foreign secretary, acknowledged it was a “very, very difficult situation that families face” in the face of a “severe global economic storm” but declined to say what the chancellor would do about it.

Speaking to BBC Breakfast, she said:

“This is a very, very serious global inflation spike which is having huge effects around the world.

We have made the cuts to petrol duty and the chancellor is working on what more we can do.

The important thing is getting economic growth up.”

Truss also told Sky News that Britain is facing a “very, very difficult economic situation”, but pushed back against calls for a windfall tax on energy producers, saying they should use their profits to invest more in the UK.

The Institute of Directors says UK inflation is “shockingly high”.

Kitty Ussher, Chief Economist at the Institute of Directors, says Rishi Sunak should say if he plans to provide more help on energy bills, as is being reported today.

Ussher explains:

“Business leaders tell us that the UK macroeconomy is now their number one negative issue, driven by worries over inflation. As a result, firms are becoming more reluctant to invest, storing up problems for the economy in future.

“If the Chancellor intends to intervene in advance of the further price cap rise in the autumn, he should make that clear, to start bringing expectations of future inflation back down.”

The Times this morning reports that the chancellor is drawing up plans to increase the warm home discount by hundreds of pounds, before cutting taxes to help with the cost-of-living crisis.

They say:

The chancellor will take a two-pronged approach: a package to help with energy bills in July followed by general tax cuts in the autumn.

From October the warm home discount will give three million of the poorest households in England and Wales £150 off their bills. Treasury officials have drawn up a range of options, including a one-off increase of £300, £500 or even £600 to help households to cope with soaring energy prices.

CBI: Critical that government helps people facing hardship

The CBI, which represents British businesses, says it is ‘critical’ that the government helps people facing real hardship now in this ‘historic’ squeeze.

Rain Newton-Smith, CBI chief economist, said the government must also support vulnerable firms:

Inflation was always likely to hit hard in April given the energy price cap increase. Looking ahead, inflation is likely to stay high, with a resulting historic squeeze in households’ incomes and a tough trading environment for businesses.

“It is critical the government explores options to help people facing real hardship now, and support cashflow for vulnerable firms. Stimulating business investment is also crucial, to both plug the near-term gap in growth and to shore up the economy’s potential to withstand future shocks.

Turning good intentions on a permanent investment deduction into a firm commitment, setting out an infrastructure roadmap and publishing a digital strategy are steps which can be taken without delay.”

Shadow chancellor Rachel Reeves said the rate of inflation hitting 9% in April would be “a huge worry for families already stretched”, and urged the government to back Labour’s call for an Emergency Budget.

Updated

Sunak: cannot protect people completely from global challenges

Rishi Sunak, who is facing growing pressure from all sides to offer more help to households, has said the government ‘can’t protect people completely’ from high inflation.

The chancellor says countries around the world were being hit by rising prices, and that the increase in regulated energy tariffs pushed up inflation in April.

“We cannot protect people completely from these global challenges but are providing significant support where we can, and stand ready to take further action.”

Inflation in the US was 8.3% in April, while it hit a record high of 7.5% in the eurozone -- with countries around the world experiencing higher costs of energy and food.

But the longer Sunak simply ‘stands ready’, the more struggling families will suffer.

Updated

ONS: Inflation rose steeply in April

Grant Fitzner, chief economist at the Office for National Statistics (ONS), says there was a steep increase in inflation last month:

“Inflation rose steeply in April, driven by the sharp climb in electricity and gas prices as the higher price cap came into effect.

“Around three-quarters of the increase in the annual rate this month came from utility bills.

“We have also published new modelled historical estimates today which show that CPI annual inflation was last higher 40 years ago.

“Steep annual rises in the cost of metals, chemicals and crude oil also continued, along with higher prices for goods leaving factory gates.

“This was driven by increases for food products, transport equipment and metals, machinery and equipment.”

UK factories raised by prices by 14%

UK factories have hiked their prices last month, as they passed on rising costs to customers, the ONS reports.

Output prices (what firms charge at the factory gate) were 14% higher than a year ago in April, which is the highest rate since July 2008.

Input prices (what firms pay for energy, raw materials and parts) jumped by 18.6% over the last year, a record high.

That highlights the inflationary pressures in the economy, as these producer prices will feed through to consumers in the shops.

UK producer price inflation
UK producer price inflation Photograph: ONS

Updated

Inflation: the key charts

These charts highlight just how rapidly UK inflation has soared in recent months - now four times as high as the Bank of England’s 2% target.

UK inflation rates
UK inflation rates Photograph: ONS
UK inflation
UK inflation Photograph: ONS

While this chart shows the impact of lifting the energy price cap by 54% last month:

UK inflation
UK inflation Photograph: ONS

Fuel costs at record highs

Record petrol prices also pushed up the cost of living in April.

Average petrol prices were 161.8 pence per litre in April 2022, compared with 125.5 pence per litre a year earlier, and the highest on record.

Diesel averaged 176.1 pence per litre, was also the highest recorded.

As a result, motor fuels and lubricants were 31.4% more expensive than a year ago -- the highest inflation rate for this category since the data series began in January 1989, driving up the cost of motoring and transporting goods.

Yesterday, the government put pressure on fuel giants to pass on the 5p per litre cut in fuel duty to customers. Business Secretary Kwasi Kwarteng wrote to the industry “to remind them of their responsibilities”:

Lifting the energy price cap in April resulted in 12-month inflation rates of 53.5% for electricity and 95.5% for gas, the Office for National Statistics says.

Housing and household services, which includes energy bills, and transport costs such as motor fuels, had the largest impact on inflation.

UK inflation at 40-year high.

At 9%, the UK’s consumer prices index is the highest since it started being calculated in 1997.

The Office for National Statistics estimates that CPI hasn’t been higher since 1982.

UK inflation hit 9% in April

Newsflash: The UK’s inflation rate soared to 9% in April, as the cost of living crisis deepened and energy bills jumped.

Inflation is having a very painful impact on poorer families, charities and doctors have warned this week.

Families struggling to cope with energy bills are seeking shelter in McDonald’s, with one charity saying hard-pressed parents and children are spending their evenings in the fast food restaurants, relying on the facilities as an emergency kitchen, bathroom and living room.

“People are buying their kids a Happy Meal for a few quid and keeping them warm inside. Then they wash and brush their teeth in the sinks and watch television for hours on the free wifi,” says Matthew Cole, chair of the trustees of the Fuel Bank Foundation, a body which tries to help families with their bills.

Action for Children warned this week that hard-up families are skipping meals, wearing coats indoors to stay warm, and living in the dark because they can’t afford to switch on the lights.

And a poll commissioned by the Royal College of Physicians found that more than half of people in the UK have already seen their health deteriorate as a result of the cost of living crisis, with doctors warning some patients can no longer afford to look after themselves.

Dr Andrew Goddard, the president of the RCP, said:

“The cost of living crisis has barely begun, so the fact that one in two people is already experiencing worsening health should sound alarm bells, especially at a time when our health service is under more pressure than ever before,”

Rishi Sunak faces Tory clamour to act now on cost of living crisis

Tory MPs are piling pressure on Rishi Sunak to take decisive action to deal with the cost of living crisis with measures such as cutting VAT, increasing energy bill support and raising benefits, as inflation is forecast to top 9% on Wednesday.

A string of Conservatives from across different wings of the party called on the chancellor to intervene within weeks, amid dire economic predictions about the squeeze on households.

One senior Tory, Sir Bernard Jenkin, the chair of the liaison committee that holds the prime minister to account, will warn on Wednesday that “the economic situation is far worse than the government is prepared to admit”.

He is expected to highlight new figures obtained from the House of Commons library showing pensioners and the lowest income households face paying £1,000 more a year for food and energy, arguing that any help for them cannot “wait until the autumn”.

He will say:

“The measures that need to be looked at are £20 uplift in universal credit, transferring the cost of energy green levies to the exchequer, abolishing VAT on domestic fuel, increasing the warm homes scheme, and increasing the pensioners’ fuel allowance.”

Jenkin also backed the idea of cutting VAT overall as the present inflation and tax increases are “sucking demand out of the economy”.

Here’s the full story:

Introduction: UK inflation could hit 9% in April

Good morning, and welcome to our rolling coverage of business, the world economy and the financial markets.

The UK cost of living crisis intensified in April as households and businesses were hit by the worst cost of living crisis in decades.

The latest UK inflation data, due at 7am, is expected to show prices soared again last month. Economists predict consumer prices rose by around 9.1% over the last year, which would be the highest inflation rate in around 40 years, up from 7% in March.

Millions of households were hit by soaring energy costs last month, after Ofgem lifted the price cap on bills by 54%.

Food prices have been rising very sharply too, with Russia’s invasion of Ukraine driving up the cost of cereals, cooking oil and meat.

Michael Hewson, analyst at CMC Markets, explains:

Not only are consumers having to contend with higher gas and electricity prices, but also higher food and petrol prices, along with higher council tax, streaming subscriptions, gym memberships and other discretionary costs, as well as a pound that is 9% lower against the dollar from a year ago when it was at $1.3900.

While headline CPI is expected to rise from 7% to over 9%, core prices are expected to from 5.7% to 6.2%, while RPI is expected to rise from 9% to 11%, and a 40 year high.

The intensifying cost of living squeeze is certain to lead to more calls for action from the government to help struggling families, such as more support for energy bills, or uprating benefits in line with the current inflation rate.

A poll yesterday found that one in four people have resorted to skipping meals, while others have been borrowing money or going out less to make ends meet.

On Monday, the Bank of England governor said he was unable to stop UK inflation hitting 10 per cent this year, as most of the factors were beyond the BoE’s control, with the Ukraine war risking “apocalyptic” food prices.

The agenda

  • 7am BST: UK inflation report for April
  • 7am BST: UK producer prices index for April
  • 9.30am BST: UK house price index for March
  • 10am BST: Eurozone inflation report for April
  • 1.30pm BST: US building permits and housing starts

Updated

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