Inflation hits four-year high as wage squeeze worsens

Payroll - by The Resolution Foundation

UK inflation has hit its highest rate in nearly four years, new figures have revealed.

The Consumer Prices Index rose from 2.3 per cent to 2.7 per cent in the last month - well above the Bank of England's target of 2 per cent.  

Meanwhile, earnings including bonuses only rose by 2.3 per cent in the three months to February.

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Rising air fares was the main contributor to the jump in inflation, while the cost of clothing, electricity and road tax were also a major factor.

The Consumer Prices Index including owner occupiers’ housing costs (CPIH), was 2.6 per cent in April 2017, up from 2.3 per cent in March. This means it has quadrupled since Theresa May became prime minister. 

TUC General Secretary Frances O’Grady urged parties to put pledges to create jobs at the core of their campaigning until the election.  

“The last thing Britain needs is another real wage slump. But rising prices are hammering pay packets,” she said.

“Working people are still £20 a week worse off, on average, than they were before the crash. That’s why living standards must be a key battleground at this election.

“All the parties need to explain how they’ll create better paid jobs, especially in the parts of the UK that need them most.”

Liz Cameron, Chief Executive of Scottish Chambers of Commerce, said rising prices and squeezed wages had put pressure on businesses.

“These challenges, coupled with ongoing political uncertainty represent a risk for the Scottish economy, which our politicians must respond to. 

"With a General Election campaign in full swing, politicians of all parties must remember that it is Scotland’s businesses that are the creators of jobs, wealth and growth in our economy, and businesses will be examining the various parties’ plans to address this situation with keen interest.”

If Theresa May is re-elected, she will be the first incumbent Prime Minister to win an election while wages are falling, according to the Resolution Foundation.