The drop in inflation is welcome news to anyone who is trying to live within a budget of any kind and calls into question the mileage left in Labour's campaign against the Coalition on the cost-of-living crisis.
Inflation has fallen for the sixth consecutive month. The Consumer Prices Index, based on goods and services bought by households, fell from 1.7% in February to 1.6% in March, while the Retail Prices Index, which also measures a basket of goods and services but includes housing costs such as mortgage payments, dropped from 2.7% to 2.5%.
Coalition ministers were quick yesterday to trumpet the figures as good news for all those sainted "hard-working families" and clearly enjoyed putting Labour on the back foot. But ministers know that the cost of living squeeze remains very real for millions of people. Inflation had been above wage growth for years before it started coming down and, even now, wages are still not keeping pace with inflation. That might change in the near future, or it might not. Meanwhile, economists are divided over whether inflation has dropped as low as it is likely to go, or whether it could fall further. Until now, growth in consumer spending has largely been fuelled by people offloading savings and taking on more debt; it must come from consistent wage growth instead if a truly solid recovery is to take place.
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The RPI and CPI are valuable measures, but they are necessarily crude since they cannot do more than estimate household spending. What is more, a focus on wage increases and consumer prices tends to exclude the experience of those feeling short of money due to welfare cuts. A tale of two nations is emerging as the recovery gathers pace. It was announced yesterday by food bank provider the Trussell Trust that there had been a five-fold year-on-year increase in the number of people referred to them for help. In Scotland, 71,400 people used food banks last year. Many of these families have been hit by welfare cuts and the Chancellor would like to cut another £12bn off the welfare budget if re-elected next May, as a part of a major ongoing austerity programme.
Those in work will hope their wages continue to grow consistently but, following the banking crisis, the public has no more patience for financial institutions that dole out excessive executive pay. Standard Life customers will perhaps be less than impressed that the new chairwoman of its pay committee, Lynne Peacock, will receive £97,000 for doing a part-time job. Ms Peacock received a £475,000 termination payment as part of a £1.5 million package for her final nine months as chief executive of Clydesdale Bank in 2010.
Standard Life Investments stuck its head above the parapet, as an institutional investor, by voting against BP's remuneration report last year; it seems somewhat inconsistent to pay its part-time remuneration chairwoman so well.
The economy is improving but, given widening social inequalities and ongoing public disquiet over executive pay, this is no moment for the Government to pat itself on the back.