So what does the Bank of England say about inflation?

Here’s quote from a February 2008 report on ‘Prospects for Inflation’. This is from the MPC – the Bank of England’s Monetary Policy Committee:

In the central projection, CPI inflation picks up sharply in the near term, reflecting higher energy, food and import prices. Some increase in these prices was anticipated in the November Report. But since then, a number of domestic gas and electricity suppliers have announced substantial tariff rises, oil and food prices have risen further and sterling has depreciated, putting upward pressure on import prices (Section 4). The extent to which these raise overall CPI inflation in the near term will depend on what happens to other prices, and on the extent to which domestic producers and retailers absorb higher input costs in lower mark-ups. Retail discounting was reported to be extensive for non-food items over the Christmas period (Section 2). But survey measures of businesses’ short-term pricing intentions have risen considerably. The central projection assumes that CPI inflation will pick up sharply in the near term as many of these costs are passed on, and the falls in retail energy prices of a year ago drop out of the twelve-month comparison.

Put more simply, inflation is set to rise. The full report is here.

An interesting chart, from the same report, bears this out. This shows the range of estimates of inflation in the first quarters of 2010 and 2011 – the period covered by Year 2 and Year 3 of the proposed pay deal.

 

So, the chart confirms that no one really knows – but look at the most popular estimate. The expert commentators are most likely to plump for CPI inflation being greater than 2.5% in Years 2 and 3 of the pay deal. Remember that CPI is the tweaked version of inflation that doesn’t reflect the costs for normal households. ‘Real’ inflation is RPI – the Retail Price Index always used in wage bargaining. RPI is currently 1.6% higher than CPI; in the past, the discrepancy has been even greater.

All a bit technical – but the conclusion is that an awful lot of financial experts expect inflation to be over 4% in the years when we’re being offered 2.4% and 2.25%. Yup, it’s a pay cut.

Time for a fight

What’s great is the initial feedback from Unison activists who are strongly opposed to the pay cuts negotiated on their behalf. There’s a link here to the blog of Nick Holden, a member of Unison’s Service Group Executive – a body similar to the Health Sector National Committee in Unite. Unison activists will be opposing this offer at their forthcoming Service Group Executive and the Conference that follows it.

In other unions, the anger is real. The response I’m getting from Unite members is ‘No way‘.

We’re worth more than this. This is beatable. We shouldn’t be bamboozled into thinking there’s nothing we can do.

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