Why does the UK have the highest inflation in the G7?
Britain’s inflation rate has soared to the highest level since the early 1980s. After a record increase in gas and electricity bills in April, inflation is the highest in the G7. Having reached 9% last month, it is above the 8.3% rate in the US and Germany’s reading of 7.4%. Japan, an economy characterised by low inflation for decades thanks to an ageing population, has the lowest rate at 1.2%.
Here are some of the reasons why prices are rising faster in the UK than in other major economies.
Britain is a net importer of energy, meaning that it is exposed to global price shocks. The post-lockdown surge in oil and gas prices, exacerbated by Russia’s war in Ukraine, is no exception. However, some other countries have done more in response.
France has a 4% cap on electricity price rises, helped by state ownership of energy producer EDF. The country also sources the majority of its energy needs from nuclear.
Italy has a windfall tax on energy firms and is spending €8bn (£6.8bn) to shield consumers from higher bills. Spain and Portugal are capping gas prices after winning approval from the EU. Germany has cut fuel tax by 30 cents, compared with a 5p cut in Britain. Ireland has cut public transport fares by 20%, while Spain and Belgium have cut VAT on energy bills – something Boris Johnson claimed could be done after Brexit, but has failed to enacted.
The UK government has announced £22bn of support for high energy costs for the current financial year, including cuts to fuel duty, a council tax rebate and repayable loans on energy bills. The measures do not, however, influence the headline inflation rate.
Labour says the UK is the only country in the G7 where the government is raising taxes in the midst of the cost of living crisis,
Read more on theguardian.com
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