Full story: UK inflation falls to 3.4% in February to lowest level for two and a half years
Phillip Inman
UK inflation fell to 3.4% in February – the lowest level for two and a half years – according to official figures that show the annual rate of price rises starting to ease again after remaining unchanged the previous month.
The decline in the consumer prices index (CPI) from 4% in January will give a boost to Rishi Sunak, who has pledged to reduce inflation, and add to speculation that the Bank of England will cut interest rates in the summer.
Most economists had predicted that February’s headline figure from the Office for National Statistics (ONS) would drop to 3.5% – the lowest since September 2021, when it was 3.1%. A reduction in the rate of inflation does not mean that prices are falling, just that they are rising more slowly.
Investors are betting that inflation will tumble further through the spring months, reflecting the sharp decline in the price of natural gas since last year and a slowdown in food price rises.
Key events
As well as two one-day strikes on London Underground(see earlier post), Aslef have also announced a programme of one-day rolling strikes affecting 16 train companies, as they push for a pay rise.
On Friday 5 April, Aslef members will walk out at Avanti West Coast, East Midlands Railway, West Midlands Trains, and CrossCountry.
On Saturday 6th April, they will strike at Chiltern, GWR, LNER, Northern, and TransPennine Trains on Saturday 6 April;
And on Monday 8th April, workers will hold industrial action at c2c, Greater Anglia, GTR Great Northern Thameslink, Southeastern, Southern/Gatwick Express, South Western Railway main line and depot drivers, and SWR Island Line.
Aslef general secretary Mick Whelan says train drivers are determined to get a fair pay rise:
‘Last month, when we announced renewed mandates for industrial action, because, under the Tories’ draconian anti-union laws, we have to ballot our members every six months, we called on the train companies, and the government, to come to the table for meaningful talks to negotiate a new pay deal for train drivers who have not had an increase in salary since 2019.
‘Our members voted overwhelmingly – yet again – for strike action. Those votes show – yet again – a clear rejection by train drivers of the ridiculous offer put to us in April last year by the Rail Delivery Group which knew that offer would be rejected because a land grab for all the terms & conditions we have negotiated over the years would never be accepted by our members.
Over in the House of Commons, Treasury minister Nigel Huddleston has told MPs that the HMRC helpline will always be there for vulnerable and digitally-excluded taxpayers.
Huddleston said:
“HMRC helpline and web chat advisers will always be there for those taxpayers who need support because they are vulnerable, digitally excluded or have complex affairs. I recognise that such reassurances were not sufficiently clearly communicated yesterday.
“The pace of this change, of course, needs to match the public appetite for managing their tax affairs online.”
But… shadow Treasury minister James Murray asked “who on earth is running the Treasury?” following today’s “chaotic U-turn” to halt plans to shut HMRC’s self-assessment helpline for half the year.
Murray added:
“This morning a Treasury source said that ministers have halted this change immediately, implying that ministers were taken by surprise by HMRC’s announcement yesterday.
“So can the minister confirm whether any Treasury ministers had any involvement in the decision announced yesterday?”
Huddleston said that he “completely supports” the move to online services.
Full story: HMRC halts plan to close tax helpline for six months a year
Here’s our full story on the tax helpline about-turn:
Parliament’s Treasury Committee has also welcomed HMRC’s u-turn, saying:
“The Treasury Committee is extremely pleased to see that common sense has prevailed.
“We welcome the decision to reverse yesterday’s ill-advised announcement. While we do not oppose expansion of digital services for those who want to use them, we remain entirely unconvinced that HMRC is adequately prepared to impose such a significant change in how it serves taxpayers.
“Planned changes to the operation of HMRC’s phonelines have been mismanaged from the beginning. Questions still remain over the extent to which the department are prioritising its own needs over those of law-abiding and vulnerable taxpayers.
“We will continue to engage with HMRC on this issue.”
Boeing warns of cash burn amid 737-Max crisis
Aeroplane manufacturer Boeing has admitted this morning that it will burn through more cash than expected this quarter, as it grapples with regulatory scrutiny and slower output of its 737 Max jetliner.
Following the January mid-air accident, in which a door panel blew out mid-flight, Boeing now expects to cash outflows to hit $4bn-$4.5bn in the first quarter of 2024, higher than forecast in January.
Brian West, Boeing’s chief financial officer, also told a Bank of America conference in London today that a plan to reach a $10bn cash flow target by 2025-2026 would also take longer.
West explained:
“We’re not at the moment where we can manage the near term for these financial outcomes because of the work at hand around stability.
Our expectation is that we’ll get more predictable and better positioned, but it will take time.”
West also revealed that margins at Boeing’s commercial aircraft business will be negative, by around 20%, in the first quarter as the company pays out compensation for the early January fuselage failure, Bloomberg reports.
While margins will improve for the year, they will remain negative for 2024, he added.
Boeing cautions that regulatory scrutiny and slower output of its 737 Max jetliner following a January mid-air accident will take a toll on its cash flow projections https://t.co/ALHSCvfnIv
— Bloomberg (@business) March 20, 2024
Although UK food inflation slowed last month, to 5% per year, olive oil inflation was a clear outlier.
Olive oil prices were 38.9% higher than a year ago in February, the highest inflation rate of any food product in the inflation basket.
Gareth Redmond-King, head of International Programme at the Energy and Climate Intelligence Unit (ECIU), says:
“Olive oil has been something of a canary in the mine when it comes to food supplies and prices. Southern Europe has suffered two extremely hot summers in a row, as well as record temperatures through winter.
The heat, drought and fires have been devastating for many farmers in the areas worst affected, and in Spain, Italy and Greece, that includes olive growers. 80% of the UK’s olive oil comes from the Mediterranean, and prices of olive oil in the UK have risen by a staggering 96% over the last two years, as harvests have suffered and supplies have become tight.
In 2023, we spent nearly £300m on olive oil from the region – around £50m more than in 2022, but to buy 9m kg less. In Spain, prices have gone up so much that olive oil is currently one of the most shoplifted products from supermarkets.
Small firms will definitely be relieved that the drastic reduction in HMRC’s helpline opening hours has been paused today, says Tina McKenzie, policy chair at the Federation of Small Businesses:
We are very glad that HMRC has listened to the chorus of dismay which greeted its initial announcement.
“While online services are a key part of the communications mix for the tax authority, sometimes there’s just no substitute for a real human on the end of a phone line who can listen, engage, and help untangle issues.
“It’s still also the case that people trying to get through to HMRC by phone face long delays, which is causing dissatisfaction to rise, and shows that the appetite for phone services is still high.
“We want to see HMRC investing in its helplines, to cut waiting times and ensure that small business owners with urgent tax queries can get through with minimal fuss to someone who can help.
“Before phone line cuts are considered, HMRC needs to build capacity in its digital services, as if those are improved – with real people online to offer help instead of chatbots – many small firms like to interact with the tax authority this way, as it can be more flexible and available out of hours.”
HMRC helpline changes halted after backlash
Newsflash: HM Revenue and Customs has halted its plan to scale back its telephone helplines, following a loud backlash yesterday.
HMRC says the plan – which included turning off its self-assessment helpline for six months a year, and cutting back other services, would be halted while it engages with its stakeholders about how to ensure all taxpayers’ needs are met.
The plan was part of HMRC’s attempt to move more people onto its online services, but was heavily criticised yesterday; the Chartered Institute of Taxation called the decision “misguided”, while Conservative MP Harriett Baldwin said it was a “great shame”.
Today, HMRC chief executive Jim Harra says the tax authority has listened to feedback.
Explaining today’s sharp u-turn, Harra says:
Making best use of online services allows HMRC to help more taxpayers and get the most out of every pound of taxpayers’ money by boosting productivity.
Our helpline and webchat advisers will always be there for those taxpayers who need support because they are vulnerable, digitally excluded or have complex affairs.
However the pace of this change needs to match the public appetite for managing their tax affairs online.
We’ve listened to the feedback and we’re halting the helpline changes as we recognise more needs to be done to ensure all taxpayers’ needs are met, whilst also encouraging them to transition to online services.
The Federation of Small Businesses has welcomed the decision to halt the “ridiculous” plan:
❗️ BREAKING: Pleased that HMRC has halted ridiculous planned reduction in its tax helpline, following pressure from us and others.https://t.co/ihQTtvVo7L
— Federation of Small Businesses (FSB) (@fsb_policy) March 20, 2024
Earlier this morning the Telegraph reported that chancellor Jeremy Hunt had ordered HMRC to scrap its plans to close its phone lines over the summer.
London Underground drivers to stage two 24-hour strikes
Newsflash: Londoners are facing more industrial action on the tube in the next two months.
Train drivers on the London Underground will take strike action on April 8 and May 4 in a long-running dispute over working conditions, the ASLEF trade union has announced.
ASLEF says the train network had failed to give assurances over changes to their working terms and conditions.
Finn Brennan, the union’s organiser on London Underground, explains:
“Despite a previous commitment to withdraw plans for massive changes to drivers’ working conditions, London Underground management has established a full-time team of managers preparing to impose their plans.
“They want drivers to work longer shifts, spending up to 25% more time in the cab, and to remove all current working agreements in the name of flexibility and efficiency.
“Everyone knows what these management buzz words really mean. It’s about getting people to work harder and longer for less.”
Investors have added to their bets on Bank of England interest rate cuts later this year, Reuters reports, after inflation fell to its lowest in nearly two and a half years.
They explain:
Interest rate futures were pricing a roughly 63% chance that the BoE will cut Bank Rate to 5.0% from 5.25% – its highest since 2008 – at its June meeting, up from about 58% before the inflation data. They were fully pricing in a 25 basis-point cut in August.
