Where do we start? It is the summer solstice of 2023 and as the sun rises to its peak, so does UK debt. The Office for National Statistics reported today that Government debt hit 100.1 per cent of GDP in May, the first time the figure exceeded 100 per cent since March 1961. Much of this is due to public sector net borrowing reaching £20 billion in May, a mere £10.7 billion more than in the same month last year.
At the same time inflation in the UK stayed put at 8.7 per cent last month, marking the fourth month in a row that price rises have exceeded forecasts. With mortgage rates as high as an elephant's eye the feared 0.25 per cent increase tomorrow, has turned into something homeowners now hope for, as most money is now placed on a larger 0.5 per cent rise, with no reductions in the cost of borrowing until, at the earliest, next year. The Bank's Monetary Policy Committee said after its last meeting on 11 May that it would increase the cost of borrowing further: "if there were to be evidence of more persistent inflationary pressures." So, that's tomorow's headlines ruined then.
We get it, we have an inflation problem in the UK. But this has not been caused, as it usually is, by economic growth, and it seems the Bank of England will have to use the only apparent gear at its disposal and push our economy into recession to finally get on top of the problem.
It is not a great mystery. The continuing impact of high energy costs and strong wage pressure (because of high inflation ... and the continuing impact of high energy costs) is probably the cause of high inflation, which - in all probability - will create more pressure on wages and so it continues in the round.
Jeremy Hunt is said to be resolute in his stance not to offer mortgage support to borrowers caught in the headlights of the runaway interest rates train. He also will not cut taxes (as that would add further inflationary pressure) or change Government policy in any way. He used what we think was an orange analogy, talking about the need to "squeeze every drop of high inflation out of the economy." This play on words is actually very apposite, as orange juice futures have increased by almost 50 per cent in the last 12 months to $2.60 per pound.
Kier Starmer and Rachel Reeves hopes that Jeremy Hunt, Andrew Bailey and the gang will get this sorted before the middle of next year when they are due to take over and can claim the lower numbers and higher good fortune as something of their own.