Derek King

I was tickled to see this @stephen_collins cartoon in The @guardian today! theguardian.com/lifeandstyle…

Today’s disclosure that CPI inflation has fallen to 1.7% will be a political headache for the Treasury and the government, because it means benefit payments will rise next spring by less - possibly significantly less - than cost-of-living rises for those on low incomes, which are largely about energy and food. Today’s fall in inflation to well below the 2% target is due to air fares and motor fuels, of less relevance to those on low incomes. The small likely benefits rise now in the pipeline will re-ignite concerns about children forced to live in poverty. Labour’s left will reinforce its campaign for the two-child limit on universal credit to be lifted. As for the £40bn that the government needs to find in the 30 October budget to avoid austerity - which I talked about on last night’s News at Ten as the driver for big planned rises in employers’ national insurance and the capital gains tax basic rate - the low inflation is a double edged sword.  On the one hand it should limit the growth in welfare spending.  On the other, it means the controversial cash freeze in tax thresholds is worth correspondingly less in real or inflation-adjusted terms.