Government's role in inflation staying high

Last weekend, I wrote to the Telegraph about the inflationary impact of many government imposed regulatory changes.....my letter is below. I have long thought that the Bank of England has failed to properly represent modern supply chains in its models and the Governor admitted as much when he said last month the bank had "very big lessons to learn", with?inflation still in double digits. The Government too has lessons to learn on the impact of many of their regulations on consumers pockets....

Sir, Retailers see the pain of inflation. They see shoppers struggling to manage their budgets. And this is why they work hard to cut costs and hold back price rises wherever possible. So it’s welcome news that recent data from the ONS and BRC show the first signs of a much-needed dip in food inflation.

Some cost pressures acting right across the supply chain will take time to work their way through to prices at the checkout. Others are firmly in the hands of Government, namely taxes and regulation.

The Telegraph recently broke the story of a possible Government plan for price controls; surely a 1970s solution to a 2020s problem. In reality, intense competition between retailers puts downward pressure on prices, even as rising costs force them up. The focus of interventions should be those that make a genuine difference to families and there are more meaningful actions Government can take to keep inflation heading in the right direction.

Over the next year or so, a raft of new regulations and taxes will burden retailers – and ultimately us as consumers – with higher costs. Just as inflation looks to be finally turning a corner, these new policies put the prospect of this at peril. Government needs to take these in turn, considering whether to implement, postpone, or scrap each one.

The Government’s Resources and Waste Strategy is a ￡4bn a year headache for retailers and their customers. Made up of reform to Extended Producer Responsibility – a tax on packaging - and the introduction of a Deposit Return Scheme, together this represents an unambitious and ineffective package of measures that will do little to improve our abysmal recycling rates. ?

From next April, an inflation-linked business rates hike is likely to cost retail at least ￡400m a year: money better spent cutting prices. Finally, new border controls and potential new labelling requirements following our exit from the EU, means millions of pounds more spent on red tape and package labels, including unnecessary changes Government has chosen to implement as part of the Windsor Framework.

Retailers are playing their part. If Government persists with introducing this raft of new regulation and tax rises, then it has only itself to blame when it fails to meet its own inflation targets.?

#retail #recycling #taxes Rishi Sunak The Telegraph