John McDonnell: millions face inflation trap
Millions of people face being “caught in a vice” next year between rising prices and pay freezes, shadow chancellor John McDonnell warned today.
He urged the Government to do more to protect “left-behind Britain” from economic turmoil and to invest more in the country’s long-term future.
Latest figures showed inflation nudging down slightly, from one per cent to 0.9 per cent in October, but the Bank of England and many other economists believe the slump in the value of sterling will result in higher shop prices in the coming months.
Mr McDonnell also signalled a shift in Labour’s stance on Brexit, saying that it would try to make it a success rather than oppose it.
“It is time we all were more positive about Brexit,” he was due to say in a speech in central London, stressing that his party would not block the triggering of Article 50 to start the two-year process of quitting the EU.
He also urged Chancellor Philip Hammond to stand up to Brexiteer ministers including Foreign Secretary Boris Johnson, Brexit Secretary David Davis and International Trade Secretary Liam Fox, warning that Britain would suffer if it had a “weak chancellor” during turbulent economic times.
Amid reports of Cabinet clashes, Mr McDonnell was set to warn: “While this circus is under way, something deadly serious is happening: sterling has fallen and that means, in the next year, many of us will be caught in a vice between rising prices and frozen pay.” Mr Hammond is expected to announce billions of pounds of infrastructure spending in the Autumn Statement next week to stop the economy from stalling.
Inflation fell after lower rises in clothing and footwear prices and the figure was below City expectations of 1.1 per cent. The Office for National Statistics said there was “no clear evidence” that the plunge in the value of pound since the EU referendum result was bumping up shop prices. The largest pressure on prices came from motor fuels, which rose 2.3 per cent between September and October.
However, there are signs that the fall in the pound is raising costs for manufacturers, with the Producer Prices Index showing total input prices rising 12.2 per cent in October, against a 7.3 per cent rise in September.
Earlier this month, Bank of England governor Mark Carney said that Britons should expect sharply higher costs, with the Bank’s latest forecast showing inflation shooting up to 2.7 per cent next year.
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