INFLATION has soared to 5.5% – its highest level in 17 years. The figure for the end of June was up by 0.7% from the end of March.
The equivalent figures for the UK and Jersey are 4.6% and 5.6% respectively. Deputy Treasury and Resources minister Jack Honeybill (pictured) admitted the size of the increase had come as a shock.
‘I think it’s very disappointing. I certainly didn’t expect it to be so far from the last rate. But I think we were all bracing ourselves because there had been a lot of talk about the increase in fuel and transport costs.’
Deputy Honeybill said the continued impact of housing on RPI remained a worry. The housing group was the largest contributor to the annual percentage change at 1.1%
‘Looking at the breakdown, the rise in the price of housing is a concern because it shows that landlords are still increasing rents which hits the pockets of tenants and prospective tenants. And because of the credit crunch, mortgages are not as cheap as they were three months ago either.’
In June 2007, inflation stood at 4.7%, while in June 2006 it was just 3.4%.
Age Concern island chairman Deputy Jan Kuttelwascher said the escalating RPI figure was a major worry for everyone, not just the group of people the charity represents.
And he believes the real rate of inflation is much higher than 5.5%.
‘In real terms it could be nearer 15%. I don’t think there is anyone in the island who is enjoying inflation at 5.5%. They will be suffering much more than that.
‘And I don’t think it’s at an end yet. I think it will get even higher and we will see that figure of 5.5% go up to 6% or more.’
Deputy Kuttelwascher said that the rising cost of food and energy was going to impact on the older generation the most.
‘Inflation affects everyone, but the fact is that most of the money older people spend is on energy and food. It’s a worry.’
However, he said the States often paid above-RPI increases in pensions, which is better than those in the UK have to contehnd with.
Deputy Honeybill hoped that inflation would not continue to increase so dramatically.
‘I would hope RPI would stabilise itself, but if we continue to see it rising, then it’s a concern in many ways and on many fronts.
‘But it’s something you can only watch because there is little that can be done.’
Guernsey’s RPIX, which exludes mortgage interest payments, was 5.4% this quarter, compared to 4.3% at the end of March.
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15 Article Comments
The inflation rate may be underestimated but the published figure is used for rent increases which will hit the private rented sector harder than any other residents. How about capping rent increases ?
Quite amazing that Deputy Honeybill is so far removed from reality to make such a statement that “I certainly didn’t expect it to be so far from the last rate”.
Many amongst the man or woman in the street, clearly have a better understanding of finance than does the Deputy Minister
The increased inflation rates affects much more than rents. Public sector pay is about to become one of the States’ biggest hurdles to overcome as workers fall further and further behind the pay stakes when compared to the public sector. Many are leaving to join the private sector. Mortgage rates are going up and fixed rates are becoming much more harder to find. Private rents will no doubt rise. States rents are capped I believe so that tenants never pay more than a quarter of their salary?
This island is never going to be self sufficient but from my point of view we appear to be relying more and more on licence holders in the public sector - and because we have to pay them extra allowances to entice them here their disposable income is much higher than their local colleagues. In the private sector this is arguably less so.
Is this the same Mr Honeybill who failed to notice the problems at the Post Office until it reached crisis proportions? Is this the same Mr Honeybill who has failed to protect our townscape while heading up the Town Centre Partnership? If it is - are you surprised by his surprise?
At least public sector employees still have the rather unique cushion of a final salary pension scheme to fall back on when they retire.
Ah David, the last resort. If various pension schemes hadn’t been sold off to the highest bidder, their assets stripped and the fund annihilated we could all enjoy that. Chronic underspend during boom years, to enable corps to get fat without expense has done the job.
Blame your ‘reality’ for that. Public sector workers deserve RPI and above, they knit the fabric of society together. I can only point at the various privatised botches and their low paid staff who show a lack of respect for the job in hand.
Get real, David, without these underpaid workers you wouldn’t make a profit, is that what life is about? Telling your workforce they can’t have a pay increase because it will push inflation up is a joke. Try slashing pay awards for the top earners so that they spend less?
Final salary pension schemes may sound generous - but depends on the length of service and the level of final salary. If someone has spent 40 years or more in the public sector surely they deserve a decent pension. The majority of them have been earning far less that their final sector counterparts in comparable jobs throughout their working life, providing bedrock for the pubic sector.
It is the one and only ‘perk’ if it can be called that. For a low earner a final salary scheme is not going to be too soft a cushion to fall on.
Lawrence I don’t appreciate you putting those words in my mouth. I fully agree that public sector employees are underpaid. The point I was making was that we cannot overlook that they have a unique pension scheme which has to be considered to be part of their remuneration package and that is easily overlooked when looking at the bare wage increase figures. However they can’t take their pension into account when paying the monthly household bills. I would happily pay them more in wages to compensate for ending the final salary pension scheme.
“Lawrence I don’t appreciate you putting those words in my mouth” He does that often David, you’ll get used to it.
David, they were questions, and pertinent ones following logic to its conclusion. You are the one that introduced your ‘reality’ to these threads. I am merely highlighting that your reality and the real world are different entities. If we took away the medical health cover that most of the private sector generously gives us, would that make it a more, or less attractive place to work?
What about all the other perks that have to be used to bribe people to work here? Why criticise and call for the demise of the only decent perk in a low paid job essential to the public?
Am I putting words in your mouth again?
I totally agree with Lawrence’s post. There are, of course, differences between public sector pay and private sector pay. The fringe benefits of the later far outweigh the benefits of the former. A final salary pension scheme is only a real benefit for staff who have worked the majority of their life for the public sector, and i am fed up with the incessant calls for it to be abolished or the thinly veiled snide comments that most public sector workers don’t do an honest days work. That is just not true.
Merlin a final salary pension scheme is simply something that no employer in this day and age is able to fund. Its a unique scheme and its outdated. Its time to close it.
Lawrence I must be being thick but you’ve lost me.
David saays “a final salary pension scheme is simply something that no employer in this day and age is able to fund. Its a unique scheme and its outdated”
There seems no problem funding these schemes for directors etc.
Another point is that much of the carnage in the stock market that has damaged so many pension schemes, was the result of reckless greed by so many in the financial industry.
I think Merlin’s comments of 11.34am 24 July are spot on.
Stephen final salary schemes are quickly being eradicated throughout the corporate world. The trend is unlikely to be reversed.
David that may be true but is it being replaced with something else in the corporate world: large annual bonuses and ‘golden handshakes’ - even for those who have brought their companies to the edge of bankruptcy,
We have to ask ourselves what we want from our public sector and why people work within the public sector when there are much larger salaries available in the private sector. I believe people work in the public sector for 2 reasons: firstly they want to give something to the island (may sound naive but that is my belief) and secondly there is little choice on this island for some professionally qualified staff i.e. police, firemen, teachers, nurses etc. Yes, many of them have professional qualifications and could go and get jobs in the finance sector, with better pay and conditions (many have). There are now unprecedented opportunities for the lower earners to become self employed too: there is a huge requirement for cleaners/housekeepers/window cleaners/gardeners etc as the wealthy would rather pay someone else than do it themselves - I have friends who pay £15 an hour for a good cleaner/housekeeper. The question is where would this island be if the majority of the public sector left for pastures new? Not everything can be equated to monetary values.