ALEX BRUMMER: Slaying the prices demon

Britain’s battle against the surging cost of living is proving to be more stubborn than might have been hoped.

Inflation is on the way down but it is micro steps, falling to 10.5 per cent from 10.7 per cent in November. That remains below the Bank of England forecast but is still unacceptably high.

Chancellor Jeremy Hunt isn’t going to be loosening the purse strings any time soon, judging from his response.

Inflation, he tells us, is a nightmare for family budgets, destroys business investment and leads to strikes.

Let’s take those one by one.

Yes, Chancellor, of course families are hurting, but it didn’t stop them shopping until they dropped over the festive season, dipping into the £200bn of Covid savings and flexing underused credit cards.

Business investment is a bigger worry because it helps to determine future output.

But respectfully, Jeremy, it is as much about government as anything else.

The ditching of the industrial strategy, failure to get behind new nukes, rising corporation – and higher North Sea oil – taxes, and delayed decisions on research and development incentives have not helped. 

The country needs to raise its sights above the inflation demon and envision a better future.

On strikes, you have a point. The unions have been only too glad to embrace inflation as a weapon against the Tories.

Outcomes in parts of the NHS are so bad, in terms of waiting times and excess deaths, that industrial action by nurses and ambulance workers is just another thing.

The idea that lifting nurses’ wages will suddenly have people queuing up to become health workers, as Ed Balls among others suggests, is fantasy.

Lead times on medical training mean health sector jobs are inelastic.

The better answer might be to declutter the bureaucracy around immigration. So far, the strikes concentrated in the public sector have had remarkably little impact on the economy.

Our holiday visitors, when border staff were on strike, reported speedy entry at Heathrow which shamed JFK.

WH Smith says turnover at train stations has dipped because of rail strikes but it is doing a roaring trade at airports.

Strikes may be aggravating, and the nurses have public sympathy, but they are not going to bring down the Government.

Delaying resolution until the independent Public Sector Pay Boards come up with a 2023 recommendation and prices have come off the boil looks a sensible tactic.

Among the worrying aspects of the latest inflation data is the 16.8 per cent rise in food prices. Food producers have been at pains to preserve margins and the volume of goods in grocery baskets has shrunk.

Since the cost of food is such a big chunk of the budget of the least well-off, it is worth understanding better if there is profiteering.

After all, freight and shipping costs have been coming down rapidly and alternative sources of fertiliser, to replace those coming from Ukraine, have been developed.

There is not enough in the latest prices data to prevent the Bank of England from raising rates by a quarter, if not a full half, point next month. 

Both Hunt and Bank Governor Andrew Bailey will be acutely aware that every increase adds to borrowing costs, not just of citizens but also the Government.

Markets remain unworried and the pound touched $1.24, a far cry from the fears of parity last autumn.

Road trip

Has the online food delivery sector turned the corner?

During the pandemic it raced away and the rush to stock market floats produced some stonking valuations.

Britain’s Deliveroo had a price tag of £7.6billion before it went downhill.

Dutch rival Just Eat Takeaway overreached and bought Grubhub in the US, only to rapidly U-turn, writing off a whopping £2.7billion.

It now looks to be on the way back.

It turned a profit in 2022 and is forecasting earnings of £197million this year, sending the shares up 20 per cent.

This week it enjoyed a fillip when it signed a logistics deal with Sainsbury’s. Deliveroo shares have also received a small boost.

Will Shu, the company’s chief executive, has an enormous amount of work to do if it is ever to fulfil the ambitions when it floated in March 2021.