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Tuesday, 20 April 2010

It's Going Up and it's not Volcanic Ash!

Dr Brian Sloan, Head of Business and Economic Policy

We're not talking about volcanic ash today, just inflation. Today's inflation figures, released for March, have shown an unexpected increase to 3.4%, up 0.4% from February. The rise is largely a result of increased petrol prices, fuelled by the growing price of oil and a weaker pound. Petrol prices are increasing transport costs, which are in turn holding up prices in the domestic markets. The weaker pound also means it is more costly to buy goods and services sourced from outside the UK.

These pressures make the Bank of England’s expansionary stance more difficult to maintain, but we urge them to resist any rise in interest rates as the inflation increases may be temporary. There is now a real necessity for the new government to clarify how it will tackle the massive deficit whilst still encouraging economic growth. These figures and the raft of economic data to be released later this week will intensify the election debate around the economy once again.

In other news, the Labour Party’s Business Manifesto has also been launched today - but is expected to be simply a rehash of their existing policy announcements from the Chancellor’s Budget earlier this year.

We will check the small print, but expect the fine details to be - as has become usual in the main parties' announcements throughout the campaign - absent.

Labour is expected to remain committed to a key tax break to companies investing in new plant and machinery. The manufacturing focused Manifesto will also maintain that the £100,000 Annual Investment Allowance will remain in line with inflation. The overall theme of the Manifesto is expected to show the party’s support for high tech companies and infrastructure improvements.

If you have not yet given us your opinion on this week's ‘Big Election Question’ then visit the election page of our website and make your voice heard. This week's question is on the controversial issue of taxation.

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