Cost of living soars to 5-year high, piling pressure on families
Double whammy of inflation and looming tax rises
SCOTTISH families are facing the threat of tax hikes at the same time as the squeeze on their finances intensifies.
Official figures published yesterday revealed that the consumer prices index measure of inflation rose to 3.1 per cent last month.
It means that pressure on household finances grew in the run-up to Christmas.
With wages growing at only 2.2 per cent, families are worse off in real terms than they were a year ago.
Finance Secretary Derek Mackay is expected to provide more woe tomorrow when he unveils his tax plans for the next year.
Scottish Tory finance spokesman Murdo Fraser said: ‘With inflation reaching those levels, workers can ill afford a hike in income tax.
‘The SNP should be looking to support hard workers through challenging times. Instead, it only wants to hit them in the pocket. This will very much be a double blow for Scots which won’t be felt anywhere else in the UK.’
The annual inflation rate, which is measpublished ured across the whole of the UK, has more than doubled from 1.2 per cent to 3.1 per cent in the past year – its highest level since March 2012 – largely as a result of the fall in the value of the pound following the EU referendum. A typical basket of goods that cost £100 in November last year is now £103.10, with the cost of living driven higher by the price of food, air fares and computer games.
The Federation of Small Businesses, Scottish Chambers of Commerce, the Scottish Retail Consortium and the Fraser of Allander Institute have all warned the Scottish Government against raising taxes due to the negative effects on the economy. Asked yesterday if the views of business had been taken on board, a spokesman for Nicola Sturgeon said: ‘We take all views on board and we are continually engaging with business.
‘From the First Minister downwards, all arms of government continually engage with business in a whole range of ways and take their views on board and listen very seriously to them – so of course that has been factored in, yes.
‘The Budget that we will present will be aimed at driving forward economic growth, protecting and boosting the Scottish economy. That is what the Budget will aim to do.’
Ministers admitted households are currently ‘feeling a squeeze’ ahead of Christmas.
Financial secretary to the Treasury Mel Stride said: ‘Inflation is expected to fall over the coming year, but I recognise families are feeling a squeeze now.
‘We are determined to help, which is why the Autumn Budget cut income tax, boosted basic pay by more than inflation and froze alcohol and fuel duties.’
Food prices were up 4.4 per cent on a year earlier with fish up 9.3 per cent, meat up 3.8 per cent and vegetables up 5.1 per cent. Butter prices were 21.6 per cent higher than a year ago.
Robert Wood, UK economist at Bank of America Merrill Lynch, said: ‘November’s inflation reading will prove to be the peak. We see inflation of 1.7 per cent by the end of 2018.’