Pay and bills could further affect consumer finances
August 5, 2008 by admin
Filed under News, News-Banking
The Governor of the Bank of England, Mervyn King, has recently warned consumers that their financial situations could become increasingly strained due to rising bills and below inflation pay rises. With inflation levels soaring and the cost of energy, food, and petrol continuing to rise many households could find themselves running into severe financial problems towards the end of the year, especially with wages set to rise at levels below inflation.
King was speaking at Mansion House recently when he gave the stark warning, stating that households were set to face a bleak and challenging year. He warned that average take home pay is likely to stagnate due to below inflation pay rises, whilst the cost of bills, food, petrol, and mortgage costs will continue to rise. He also indicated that the Bank of England would have to do whatever was necessary to reduce inflation, which could mean that there will be no further base rate cuts this year.
He added that sharp increases in energy bills were due later this year, and families would no longer be able access cheap loans and mortgages. In his speech King said: ‘It will not be an easy time, and I know that some families will find it particularly difficult.’ Alistair Darling also commented on the fact that big wage rises were a think of the past, stating: ‘To return now to inflationary pay settlements would undermine rather than raise living standards with a damaging circle of wage increases eroded by steadily rising prices. We must never return to those days.’
Inflation has now soared to 3.3%, resulting in Mervyn King having to write to Alistair Darling to explain why this has happened and what action will be taken to bring inflation back down towards the government target of 2%.
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