Credit, Collections & Insolvency News
CPI inflation fell to 2.6 per cent in June, down from 2.8 per cent in May, a welcome fall that was slightly larger than expected, and hands the new Government some early breathing space of its own, but it looks set to be short-lived as renewed tensions in the Middle East and rising energy costs will push inflation back up in the coming months.
There was good news on the cost of essentials in June. Petrol provided the most significant downward pressure on inflation, falling 2.1 pence per litre between May and June, reflecting lower global oil prices during the ceasefire in the Middle East. There was also another welcome fall in the price of food over the same period.
But this respite for struggling families looks likely to prove short lived. Inflation is expected to rise as soon as this month, as petrol prices rise again. Energy bills are set to rise when Ofgem resets the price cap in July, and forecasts suggest they will rise further in October, exceeding the savings from the Government’s recent announcement that it will remove VAT from electricity bills.
So the cost of living pressures facing families have not gone away, and the Government is right to focus on ways in which it can help ease the pressure on families.
The Foundation urges the new Government to prioritise targeted support for vulnerable households over universal support which offers greater relief to higher income households.
The fall in inflation to 2.6 per cent last month is welcome news for families and gives the new Government some early breathing space of its own.
But it is likely to prove short-lived. Renewed tensions in the Middle East have pushed energy prices back up in July, and with the price cap rising in July and forecast to rise again in October, inflation is set to climb again and peak later this year despite the Government’s VAT cut on electricity bills.
All of this means cost of living pressures certainly have not gone away. The Government is right to focus on what it can do to ease the pressure on struggling families. The priority should be providing fully-funded and targeted support to vulnerable households.
The 13 per cent rise in the energy price cap from 1 July – from £1,641 to £1,862 – will have only a small impact on household energy costs over the summer, rising by just £21 for a typical household. This justifies the Government’s decision to hold fire on targeted support until it’s really needed,…
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