Tuesday 26 July 2022
The Q2 2022 inflation bulletin is published today and reflects an increase in the annual change in RPIX to 7% (and in RPI to 6.8%).
This reflects the higher inflation figures that were expected in this quarter's bulletin, and is within the forecast range. It is also the highest level seen since 1991 and this continues to be driven by rising energy and fuel costs, largely as a result of the war in Ukraine.
The levels of inflation seen locally remain lower than the UK's equivalent figure (UK RPIX = 11.9%) in part because the Island is insulated from some of the cost pressures, for example the cable link which provides energy from France means the increases in energy costs are not increasing as steeply as they are in the UK. This impacts not just energy costs, but other costs as other local businesses are not having to increase their prices in response to their own rising energy bills to the same extent.
High housing costs, driven by high demand and a lack of availability, are also a key factor in the local inflation figure and addressing housing is a top priority for the States, as agreed in the most recent Government Work Plan debate. As has been widely reported, the States has invested in additional sites so that more affordable housing can be built, and it continues to look at other ways of helping to alleviate the pressure in this area.
It is expected that inflation will continue to rise later this year, and some recent increases such as the rise in electricity prices on 1 July, will not have been captured in the Q2 figure. But the Bank of England and UK Office of Budget Responsibility forecast that UK inflation should begin to come down early next year and return to more normal levels, and it is expected Guernsey's rate of inflation would follow a similar pattern.
Deputy Mark Helyar, Treasury lead of the Policy & Resources Committee said
"These levels of inflation are significantly higher than that which we've experienced in recent years. They reflect the major international events still happening around us, but they have a very real impact on many people's finances. But to see it remain lower than the levels the UK is seeing, now in double figures, is at least a bit of good news. Policy & Resources will continue to monitor the impacts of the cost of living, and we're pushing on with the priorities in the GWP which will help in some areas such as housing.
For public finances, higher inflation will mean more cost in some areas but it will also mean increased revenues in others such as document duty from house sales. We're fortunate we've built up some reserves to give us resilience in the face of any short-term surprises, but ultimately we still expect this to be a temporary period of higher inflation and for these figures to start coming back down in a matter of months."
Deputy Peter Roffey, President of the Committee forEmployment & Social Security said
"It's a difficult period for many Islanders, but we need to respond proportionately mindful of how we use public finances to alleviate the impacts. We will certainly be taking inflation levels into account when we come to the States to agree next year's pensions and benefits increases.
For right now, there are various means-tested benefits available for people who are struggling to make ends meet. We would urge anyone in this position to contact our team on 222508 to see if they might be eligible for income support, help with medical expenses or the cost of school uniform."